ServiceNow IPO Tests Investors’ Mood After Facebook’s Downer IPO
ServiceNow, the San Diego-based provider of cloud-based services for managing enterprise IT operations, priced its IPO late yesterday at $18 a share, slightly higher than the initial range of $15 to $17 per share the company estimated in regulatory filings last week.
The higher price suggests that underwriters expect investors will show an appetite for ServiceNow shares when trading begins this morning under the ticker symbol NOW on the New York Stock Exchange.
As I reported earlier this week, 9 million of the 11.65 million shares in the offering are coming from the company, with the remaining 2.65 million shares put up by Fred Luddy, who co-founded the company and has served as CEO and chief technology officer. He currently serves as chief product officer. The value of the stake Luddy sold was nearly $48 million.
ServiceNow’s offering has been characterized as a chance for Morgan Stanley, a lead co-underwritier, to escape the shadow cast last month by Facebook’s IPO, where Morgan Stanley also played a key role. Facebook shares, which were priced at $38 a share in its IPO, declined by a third but have rebounded in recent weeks. A successful ServiceNow IPO might help Wall Street restart investor enthusiasm for new technology offerings.
Lee Simmons, an industry specialist at Dun & Bradstreet, told Reuters yesterday, “I think SeviceNow is a harbinger for general investment sentiment for tech stocks over the next three to six months.”
The lead co underwriters, which include Morgan Stanley, Citigroup Global Markets, and Deutsche Bank Securities, were granted a 30-day option to purchase more than 1.7 million shares of common stock offered by ServiceNow to cover any over-allotments.
ServiceNow’s stake in the offering generated a total of $162 million, about $30 million more than the company had anticipated in papers filed last week. The company said it intends to use the net proceeds from the offering for working capital and other general corporate purposes. ServiceNow also acknowledges the possibility that the company could use at least some of the proceeds to “build out its office facilities,” expand its data center operations, and to acquire or invest in other businesses, products or technologies. But it has not committed to making any such acquisitions investments, or capital expenditures.
None of ServiceNow’s venture investors—JMI Equity, Sequoia Capital, and Greylock Partners—are selling shares in the offering.