Two of next week's US initial public offerings hope to spark investor interest; one with celebrity appeal, while the other quite literally promises a brighter future. Next week's red carpet debut is software maker NetSuite, an IPO being brought to market by billionaire Larry Ellison, a star in software circles for founding Oracle Corp.
The second deal, from Orion Energy Systems, a manufacturer of efficient lighting systems, has a lower profile but analysts say it is attracting interest. NetSuite, the last deal on the 2007 IPO calendar, and a pioneer in the hot "on demand" software sector, is expected to price its offering next Wednesday. The company, which has yet to make a profit, has filed to raise up to $99 million with a modified auction-format IPO led by Credit Suisse.
The maker of Web-accessed business management software for small and mid-sized companies posted a narrower third-quarter loss, $1.8 million on revenue of $28 million, compared with a loss of $9.2 million on revenue of about $18 million a year earlier.
Ellison, who ranked the fourth-wealthiest American according to Forbes 2006 list, has amassed a fortune worth about $19.5 billion, largely through his stake in Oracle, the world's No 3 software maker, where he is the largest shareholder.
He is also NetSuite's largest shareholder - although he has limited his control of the 10-year old company to avoid conflicts with his Oracle role - which may draw in investors who saw the riches made by early Oracle shareholders. Taking into account stock splits, a $10,000 investment in Oracle's 1986 IPO would now be worth in excess of $4.5 million.
Orion, a Plymouth, Wisconsin-based company, counts Coca-Cola and Kraft as customers, and says its fluorescent light fixtures can improve light quality while trimming energy use by up to half. Coca-Cola alone bought enough Orion light fixtures to account for 20 percent of the company's revenue in the six-month period ended September 30, growing sales by 75 percent to $35 million. Net income for the same period was $1.8 million, compared with $5,000 during the same period a year ago.
"The need for what they provide is clear but the deal seems a little high priced," said Francis Gaskins, president of research firm IPOdesktop.com, noting that Orion's price-to-earnings ratio was 75, based on annualised earnings through September 30.
Competitors such as Johnson Controls and Honeywell International, although much bigger and in a wider range of business lines than Orion, are cheaper with price-to-earnings ratios in the high teens. Gaskins said Orion's 16 patents "somewhat" protect it from competition.
The company has filed to raise in the region of $100 million with its offering of 7.7 million shares, expected to price on Tuesday. The sector is in the midst of some consolidation activity with Dutch Philips Electronics launching a $2.7 billion offer for US lighting maker Genlyte Group Inc on November 30, saying it expected total synergies of about 60 million euros as a result of the deal.
If the NetSuite and Orion deals do well it could lift the IPO market out of the doldrums of recent weeks. Investors, spooked by volatile stock markets, gave some new issues a frosty reception. Since the beginning of November, 21 companies that filed to raise more than $6 billion in IPOs have put their plans on ice, most citing unfavourable market conditions, according to data tracker Dealogic.
But this week the picture began to brighten. Online education company K12, medical technology firm MedAssets Inc, and two Chinese listings - Xinyuan Real Estate and VanceInfo Technologies - posted double-digit gains in their first trading days, proving there are still investors willing to buy into the right opportunities.