NetSuite's sweet IPO
By Michael V. Copeland — You have to hand it to NetSuite. While the markets have been whipsawing all around, the on-demand finance software company backed by Oracle (ORCL) CEO Larry Ellison got its IPO done via a Dutch auction at a price, $26, almost double the stock's original target.
Context & Ripple Effects
NetSuite's path to the public market started in July 2007, when the [[a:1179081|on-demand finance software company owned by Oracle co-founder Larry Ellison filed its IPO plans]], and took shape when it opted for a Dutch auction rather than a traditional underwritten offering. Priced at $26 against an original target of roughly half that, the deal lands in a market Techland describes as whipsawing — making the near-double pop a demand signal for subscription software specifically.
The listing also sharpens Ellison's unusual position: he backs NetSuite as an investor while running Oracle, which spent 2007 buying aggressively — 41 acquisitions over 45 months per its own OpenWorld keynote — and saw its unsolicited $17-a-share bid for BEA rejected by that company's board in October.
First-order effects
- Ellison's stake in NetSuite is now marked at public-market prices nearly double the original target, converting his long-held private position into liquid paper at the top of the range.
- NetSuite becomes one of the first pure-play on-demand business software companies to clear an IPO in hostile conditions, giving Wall Street a live comparable for valuing subscription software revenue.
Second-order effects
- A successful Dutch auction executed amid December 2007 volatility hands other SaaS issuers a template that bypasses banker-set pricing, pressuring underwriters' fees and their control of first-day pops.
- Oracle's own applications strategy now has to be explained against a publicly traded, Ellison-backed on-demand rival — awkward optics for a company still selling licensed suites while touting Fusion at OpenWorld.
Third-order effects
- If the pattern holds, enterprise software's center of gravity shifts toward recurring-revenue models priced by open auctions rather than syndicate negotiations, weakening the traditional IPO machine's gatekeeping role.
- The Ellison structure — a mega-vendor's chief executive personally bankrolling a next-generation competitor — sets up a governance question about where on-demand innovation is allowed to live relative to the installed-base giants.
The trend: Enterprise software is migrating from licensed products to on-demand subscriptions, and NetSuite's auction-priced debut is the moment that model proves it can clear public markets even in a downturn.