May 20, 2009 / 1:29 AM / 10 years ago

SolarWinds closes up 10 pct, latest to jump in debut

NEW YORK (Reuters) - SolarWinds Inc (SWI.N) stock closed up 10 percent in its trading debut on Wednesday, making it the sixth consecutive IPO in the United States to record gains on the first day of trading.

After jumping as high as $15.16, or 21 percent over its offer price, SolarWinds shares eased off during the day, closing their inaugural trading session on the New York Stock Exchange at $13.75.

“Investors were looking for a growth story in software,” said Kevin Thompson, SolarWinds’ chief operating officer and chief financial officer.

SolarWinds was founded in 1999 and filed for its IPO in March 2008, a long waiting period for a software company compared with the late 1990s during the dot-com boom.

“We have not been in a hurry because the company has generated plenty of cash. We were waiting for the market to be receptive,” Thompson said.

Software and tech companies attempting IPOs tend to be more mature now and therefore already profitable, analysts said.

“Tech stocks have been mixed this year, but firms realize they have to be productive so they are renewing their equipment,” said Linda Killian, a principal with Connecticut- based investment firm Renaissance Capital.

“There was scarcity to this deal,” Killian added, explaining SolarWinds’ strong pricing and debut.

The company’s strong profitability was also a major draw for investors, another analyst said.

“For every dollar of added top line revenue, SolarWinds gets a bigger percentage of profit increase than their competitors, who have lower profit margins,” said Francis Gaskins, president of research firm IPO Desktop.

SolarWinds shares opened at $15 the morning after the Austin, Texas-based company sold 12.1 million shares at $12.50 apiece, raising $151.5 million in the first IPO by a venture- backed technology company in the United States in nine months.

The IPO offer price had exceeded the estimate range in an oversubscribed deal.

SolarWinds deal was the sixth consecutive IPO on a U.S. exchange to jump in its debut, and the fifth to do so in double-digits, following such companies as satellite image maker DigitalGlobe Inc DGI.N, which jumped 13 percent in its debut last week, and language-instruction company Rosetta Stone Inc (RST.N), which rose 40 percent after its IPO.

SolarWinds’ IPO was the sixth in the United States so far this year and the fifth by a U.S. company.

“These successful deals change the mindset that the IPO market is closed. I think you will start to see others follow and try an IPO,” said Scott Cutler, head of new listings at NYSE operator NYSE Euronext Inc NYX.N.

So far, all five IPOs by U.S. companies this year have listed on the NYSE, but restaurant reservations system operator OpenTable Inc is set to price its IPO Wednesday and begin trading on Nasdaq the following day. Chinese video game maker Changyou.com Ltd (CYOU.O) listed on Nasdaq in April.

Reporting by Phil Wahba; Editing by Maureen Bavdek, Andre Grenon and Bernard Orr

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