By Dow Jones Business News, March 20, 2013, 10:21:00 AM EDT
By Chris Dieterich and Alexandra Scaggs
NEW YORK--Shares in Model N Inc. (MODN) rose as the first business-software company to head to market this year
continued the strong run for IPOs in the niche sector.
Shares opened at $20.30 on the New York Stock Exchange, above their $15.50 offering price. They were up 35% to $20.89
in recent trading.
Model N, sold six million shares in the deal, while existing shareholders sold another 740,000 shares, giving the deal
a gross value of $104.5 million.
The company, based in Redwood City, Calif., sold shares for more than the $12.50-to-$14.50 a share originally targeted
in documents filed with the Securities and Exchange Commission.
The firm makes revenue-management software for pharmaceutical and technology companies. It sells software licenses and
subscriptions via "the cloud," which refers broadly to Internet delivery.
Model N's customers--which include Merck & Co. ( MRK ), Dell Inc. ( DELL ) and Bristol-Myers Squibb Co. ( BMY )--use its
software to manage functions such as pricing, contracting and issuing rebates.
Sales climbed 29% to $84.2 million in the 12 months that ended in September. Model N reported a net loss of $5.6
million over the same period as research-and-development and marketing efforts expanded.
Model N comes to market as the latest issuer in the enterprise-software industry, where companies sell software that
serves business needs. The niche last year ushered in a host of well-performing IPOs, from the likes of human-resources
software maker Workday Inc. ( WDAY ) and tech-support software maker ServiceNow Inc. ( NOW ). Workday's stock has more than
doubled since its debut, and ServiceNow's has done nearly as well.
One potential risk is that Model N's customer base is highly concentrated, meaning the loss of any customers could
bite. Merck and Amgen Inc. ( AMGN ) together represent nearly one-quarter of its business; some 15 customers represent
three-quarters of the firm's revenue stream.
Tech-focused private-equity firm Accel-KKR Company LLC sold 740,000 shares in the offering, according to SEC
The company said it plans to use funds raised in its IPO for working capital and general corporate purposes.
Later this week, advertising-analytics software company Marin Software Inc. is set to launch its IPO, which could
gross as much as $91 million.
J.P. Morgan Chase & Co. (JPM) and Deutsche Bank AG (DB) are listed in Model N's filings as lead underwriters for the
Write to Chris Dieterich at email@example.com and Alexandra Scaggs at firstname.lastname@example.org
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