NetSuite Decides To Go Dutch For Date With Public Market

from the suite-deal dept

The concept of Dutch auction IPOs has been around for some time, but despite its promise of being fairer to investors, the concept hasn't really gained much traction on Wall Street. Without a doubt, Google's IPO is the most prominent company to have gone public this way, but it could be argued that the offering wasn't particularly successful. Considering the rapid run up in the company's shares following the initial sale, it would seem that Google left a lot of money on the table, which is one of the main pitfalls that these auctions are meant to avoid. Today, on-demand software firm NetSuite announced that it has filed to go public, a move that's been foreseen for quite some time. The company says it will use the Dutch auction model and that it has hired WR Hambrecht (one of major advocates of this model) and Credit Suisse to manage the sale. This is a good opportunity for the advocates of Dutch auctions to show that it can work since NetSuite has a lot going for it. It's in a very hot industry that investors are enamored with, as evidenced by soaring Salesforce.com shares, while the market will remember the big gains afforded to Google shareholders that bought in early. It's hard to imagine a better set of conditions for this model to work, so a failure would be a signal that the concept doesn't have much of a future.
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  1. identicon
    Ann, 6 Dec 2007 @ 12:52pm

    Google's rationale/reason for using an auction included letting 'everyone' participate, but most countries around the world allow everyone to participate without using an auction. Google also argued that the auction process would be more efficient at setting a price, but they had little theoretical or empirical reason to expect this - it was based more on hope and hype than on logic. I think they meant well, but they were aware that the track record of IPO auctions around the world has been pretty dismal, so they knew that they were taking a big risk. It's lucky that their auction went as well as it did.


    But I think that everyone is missing the big story, here: Netsuite's IPO is an auction lead-managed by Credit Suisse. Yes, WR Hambrecht is also deeply involved, but this isn't one of their trademark OpenIPOs. This is only the second time a US IPO auction was managed by a 'mainstream', major investment bank (no disrespect to WR Hambrecht). The first time, Google had enough clout to force CSFB and Morgan Stanley to go along, but Netsuite isn't all that hot, so this time it's voluntary. Is Credit Suisse planning to do more of these?

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