Guidewire Software IPO: First Tech Issue of 2012
Guidewire Software (GWRE) priced their IPO yesterday morning — the tech industry’s first IPO of 2012 raised just over $115 million in an offering of 8,850,000 shares of common stock at a price of $13.00 per share. In the company’s first day of trading, shares closed at $17.12, represented a 31.7% first day pop.
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Guidewire is a venture-backed, San Mateo, CA based software company that focuses on offering back-end cloud-based solutions for property and casualty insurers. The company’s software focuses on a few core aspects of an insurer’s business: writing policies, managing claims, and billing, and one of their products, ClaimCenter, is one of the most widely used systems on the web for filing claims . What distinguishes Guidewire is the flexibility that it can provide for clients; many property and casualty insurers have used the same legacy systems for 20 to 30 years. The company boasts their cloud-based business model as a game changer, separating it from competitors such as Computer Sciences (NYSE:CSC) or Accenture (NYSE:ACN), who is relatively new to this space.
The offering represents a major step for tech companies looking to go public. 2011 delivered less than desirable results for many tech companies who hit the market, including big names such as Groupon (NASDAQ:GRPN) and Zynga (NASDAQ:ZNGA). Both companies have traded down and represent a growing concern that a second tech bubble is looming on the horizon. This skepticism shows investors to be more cautious when dealing with tech companies, preferring consistent cash flows to rapid growth potential.
Initial signs point to the offering being a success. The company originally intended to sell 7.5 million shares and sought indications from investors in a range of $10-$12 per share. Selling 8.5 million shares above the range suggests healthy demand, which should help the stock trade favorably moving forward. As other tech companies gear up to go public, with no IPO more highly anticipated than that of Facebook, Guidewire can serve as a positive example that investors are still willing to play in this space.
JP Morgan (NYSE:JPM) and Deutsche Bank (NYSE:DB) led the offering.
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