NetSuite Inc. priced its initial public offering at $26 per share Wednesday, raising $161 million for its online business software service and showering its largest stockholder, billionaire Larry Ellison, with still more riches.
The IPO proved more lucrative than the San Mateo-based company anticipated, reflecting the hopes riding on NetSuite despite a nine-year history of losses, which total nearly $242 million.
NetSuite’s investment bankers, led by Credit Suisse and WR Hambrecht, aimed to sell 6.2 million shares at $13 to $16 apiece when bidding began last week in an unusual “Dutch” auction that gave more investors a chance to participate in the IPO. The bankers still have an option to buy another 930,000 shares at the IPO price from NetSuite and its top executives.
Propelled by the strong demand for its stock, NetSuite now boasts a market value of $1.5 billion.
Investors’ interest in NetSuite will be tested again Thursday when its shares are to debut on the New York Stock Exchange under the ticker symbol, “N.”
NetSuite is at the forefront of a gradual change in the way companies — especially small- and mid-sized businesses — buy software to help manage and analyze their operations.
Instead of paying a hefty price to install programs on their own computers and maintain them, thousands of companies are subscribing to services like NetSuite’s that enable workers to use software on any device with an Internet connection.
The on-demand concept, known as “software as a service,” or “cloud computing,” is winning over converts because it saves money and boosts employee productivity by freeing programs from specific computers. Software also can be updated more quickly when it is hosted online.
“This is where all the interesting ideas in software are coming from today,” said Deborah Farrington, a NetSuite director and general partner with StarVest Partners, a venture capital firm that owns a…