Splunk Surges After Pricing Above Range in Web Data IPO

Splunk Inc. (SPLK), a maker of software that helps companies analyze Web data, more than doubled on its first day of trading after pricing its shares 70 percent above the originally proposed range in an initial public offering.
The stock, listed on the Nasdaq Stock Market under the symbol SPLK, climbed to $35.48 at the close in New York. The San Francisco-based company raised $229.5 million in its IPO, selling 13.5 million shares at $17 apiece, it said in a statement yesterday. Splunk’s market value of $1.57 billion at the time of the sale jumped to $3.28 billion.

Splunk is the first of the so-called big data companies to go public, providing software that helps businesses monitor and analyze data to improve service, cut operations costs and reduce security risks. Revenue in the fiscal year that ended Jan. 31 rose 83 percent to $121 million. Splunk’s net loss widened to $11 million from $3.8 million a year earlier as the company stepped up spending on sales and marketing.
“Splunk is really taking advantage of this big data trend and monetizing on that opportunity,” said Dafina Toncheva, a partner at Tugboat Ventures in Palo AltoCalifornia, which invests in Web and software startups. “They’re collecting massive amounts of data every second in the enterprise and making sense of it.”
Splunk shares were paused for five minutes today after the first second of trading triggered a volatility circuit breaker. NYSE Arca later canceled transactions that occurred on its platform during the mandatory halt, according to Richard Adamonis, a spokesman for NYSE Euronext.

Orders Voided

The orders were voided because of a “manual error” related to the suspension, he said, without elaborating. Trades amounting to about 26,000 shares were canceled, according to data compiled by Bloomberg.
Most technology companies that have gone public this year have gained since their offerings. Among the best performers are Guidewire Software Inc. (GWRE), which has more than doubled, and Millennial Media Inc., which has climbed 45 percent. Infoblox Inc., a network and data-services provider, and Proofpoint Inc., a maker of security software, are also scheduled to start trading this week.
Splunk said in its filing that it has a variety of competitors, including some of the world’s biggest software and Web companies. The company cited Google Inc. (GOOG) and Adobe Systems Inc. in the Web analytics market, and business intelligence vendors EMC Corp. (EMC) and International Business Machines Corp.

Rich Valuation

At Splunk’s valuation, the stock is trading at approximately 27 times reported revenue for its most recent fiscal year. That compares with a price-to-sales ratio of about 5 for Google, 3.9 forAdobe (ADBE), 2.9 for EMC, and 2.2 for IBM.
“It’s indicative of very strong demand across the board from almost every size institution that the team met with,” said John Connors, a Splunk board member and partner at Ignition Partners in Bellevue, Washington. “Investors think the story is potentially a big one and the management team was quite good and seasoned.”
Splunk is backed by venture firms August Capital, JK&B Capital, Ignition and Sevin Rosen Funds. The company raised $25 million in 2007 to expand sales and marketing, build its international operations and develop partnerships.
Founded in 2004 by Erik Swan, Rob Das and Michael Baum, Splunk’s software was used by more than 3,700 customers, including Bank of America Corp., Zynga Inc. and Harvard University, as of Jan. 31.

Price Increases

The company is led by Godfrey Sullivan, who joined as chief executive officer in 2008. He was previously CEO of Hyperion Solutions Corp. and helped sell the company for $3.3 billion toOracle Corp. (ORCL) in 2007. Sullivan replaced co-founder Baum, who left Splunk and is now a venture partner at investment firm Rembrandt Venture Partners.
On April 16, Splunk increased the proposed price range for its IPO to $11 to $13 apiece, from a prior target of $8 to $10.
Morgan Stanley, Credit Suisse Group AG, JPMorgan Chase & Co. and Bank of America Corp. led the offering.


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