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.

Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.