NetSuite IPO Wins Fair-Value Fans

Since Google's(GOOG Quote) high-profile Dutch auction in 2004, in which the underwriters were forced to lower the price range, few companies have been willing to go that route to a public placement.

Holmes estimated that four other issues had since gone out using the process. Traffic.com priced in January 2006 at $12 and reached a high of $13.30 its first trading day. It was later bought by Navteq(NVT Quote).

From a price range above $11, FortuNet(FNET Quote) priced in January 2006 at $9, closed its first day at $9.05, rose to $24 in May 2006 and currently trades at $7.60.

In May 2007, Interactive Brokers Group(IBKR Quote) went out at $30.01, the high end of its price range, gained 4.3% on its first day, and now goes for $31.47. Also in May, Clean Energy Fuels(CLNE Quote) priced below its initial range at $12, rose to $13 its first day, and was trading at $14.98 Wednesday.

All these deals involved Dutch-auction specialist W.R. Hambrecht as either lead or participating underwriter. That company did not return a call seeking comment.

The occasional retrenchments from original price ranges is a sign the auction process reins in overestimations on the part of venture investors.

An auction brings a higher likelihood that the new issue will close at the offer price, Holmes said. The process "is more than just stacking up orders," he said. "There's some skill and science to it."

"Every open IPO deal that Hambrecht prints successfully makes the next one easier to sell," Holmes said. "They are chipping away at acceptance."