NetSuite IPO Unlikely to Succumb to 'Winner's Curse'

On-demand software provider NetSuite Inc. is in demand on Wall Street. According to a Tuesday regulatory filing, NetSuite upped the price range of its IPO from $13 to $16 to between $16 and $19 a share. The 6.2 million share offering is set to price on Wednesday and begin trading on Thursday. Despite going public while the market is winding down for the holidays, NetSuite is in a sweet spot with investors, who are enamored with "software as a service" players due to the success of industry leader Salesforce.com Inc.

There has been speculation that NetSuite could face a post-IPO hangover because the company is going public using a Dutch auction. Although that ostensibly more accurately matches a company's initial stock price to investor price, it can also cause a flush of "buyer's remorse" among holders hoping for a big first-day pop, leading to a sell-off.

In its filing NetSuite even mentions a so-called "winner's curse," which suggests there is little demand for the stock above the offer price and raising the possibility that investors will try to flip shares. This is standard boilerplate disclosure, and we don't put too much stock in it. Nevertheless, if the offering prices significantly above the current range, we would not expect a substantial first-day spike, although it should generate a modest premium from last-minute shoppers. - David Shabelman

See Dec. 18 story from AP
See Dec. 5 story from Tech Confidential
See Dec. 17 post from ValleyWag