NetSuite Announces Start of IPO Auction

NetSuite Inc., the on-demand business-management software provider controlled by Oracle Chief Executive Larry Ellison, said Monday that the auction for its proposed initial public offering of common stock has begun.

NetSuite is conducting the offering as a modified Dutch auction. In Securities and Exchange Commission filings, NetSuite said an auction open to prospective purchasers will determine the IPO price and the allocation of shares in the offering. Online search engine Google Inc. also used an auction to go public in August 2004.

NetSuite said it expects the offering to price after the stock market closes Dec. 19.

NetSuite is offering 6.2 million common shares in the offering. In previous Securities and Exchange Commission filings, NetSuite said the IPO is expected to price between $13 and $16 each.

Based on the anticipated price range, NetSuite would have a market capitalization of $773.6 million to $952.2 million.

Assuming an offering price of $14.50 per share, the company expects to raise net proceeds of about $80.9 million from the IPO, after fees and expenses.

NetSuite plans to use the net proceeds to repay the outstanding $8 million balance on the company's secured line of credit with its controlling shareholder Tako Ventures LLC. NetSuite said it may also use some of the proceeds to make acquisitions.

Tako, which holds a 60 percent stake in the company, is controlled by Ellison.

Ellison, his family and related trusts and entities will together own about 66 percent of NetSuite's common stock after the IPO.

For the nine months ended Sept. 30, NetSuite narrowed its loss to $20.6 million, from $27.6 million. During the same period, NetSuite increased its sales to $76.8 million from $47 million.

Credit Suisse Securities is serving as sole book-running manager for the offering. W.R. Hambrecht is acting as co-manager.

The underwriters have an option to buy up to 930,000 additional shares from NetSuite and a group of selling stockholders, including Chief Executive Zachary Nelson and Chairman and Chief Technology Officer Evan M. Goldberg. Goldberg, a former Oracle employee, started the company in 1998 with Ellison's help. Nelson is also a former Oracle employee.

NetSuite plans to list its shares on the New York Stock Exchange under the symbol "N."