Quest Software IPO Lures Wall St. Back for More
A Newport Beach software company founded by a UC Irvine dropout saw its stock more than triple Friday in its Wall Street debut, overnight becoming one of Orange County’s most valuable public companies.
Defying Wall Street’s growing distaste for public offerings by technology firms, Quest Software Inc. saw its shares surge to $47, a $33 gain, in frenzied trading on Nasdaq.
The profitable Newport Beach company, which develops software that allows companies to manage and retrieve information from large databases, sold 4.4 million shares of stock to the public. But more than 14 million shares changed hands Friday, making Quest the ninth-most active stock in the U.S.
The $47 closing price put the company’s market value at nearly $1.8 billion.
Analysts said software companies are riding a wave of support in the days after the spectacular public debut of shares of Red Hat Inc., a North Carolina firm that markets the computer operating system Linux, which rivals Microsoft Corp.’s Windows NT. Red Hat’s stock rocketed to $52.06 on Tuesday, up 272% from its $14 offering price. The shares remained red-hot, jumping 17%, or $12.63, on Friday to $85.25.
Unlike many other technology companies debuting this year, Quest Software is in the black. It has enjoyed steady financial growth since 1994, earning $2.3 million on $34.8 million in revenue last year. For the first three months of 1999, the firm earned $883,000 on revenue of $12.8 million.
Vincent C. Smith, the company’s 35-year-old chief executive, holds a 47.8% stake in Quest that is now worth $855.4 million.
The stock sale generated $57.3 million for the company, which plans to use the proceeds to redeem preferred stock, repay debt and for general corporate purposes.
Whereas Red Hat’s initial public offering had been widely anticipated, Quest’s coming-out party was supposed to be a much quieter event.
“This was a deal that was perceived to be good, but not that good,” said David Menlow, an analyst at IPO Financial Network. “They got swept up in the ‘all is well’ mentality after Red Hat’s performance.”
