The application delivery controller peddler A10 Networks had a tepid start to its first day of trading as a public company Friday.
As of 2:05 p.m. ET, the stock price was $15.55, up about 3.7% from the IPO price of $15. A10 initially traded below its IPO price, starting at $13.75. A10 Networks Inc. sold 12.5 million shares in its IPO, raising $187.50 million.
How does Lee Chen, founder and CEO, feel about the pricing? "I'm more the long-term value investor, so I don't pay attention to one day trading up or down," Chen told us, dodging the question diplomatically.
Other business software stocks with recent IPOs performed a lot better, The Wall Street Journal reports (subscription required). For example, the retail e-commerce software maker Borderfree Inc., which also started trading Friday, had gained 23% by midday, passing its IPO price of $16 to trade at about $19.50. The health plan software provider Castlight Health had gained 149%.
Financial journalists and Wall Street watchers look for rocket rides on the first day of an IPO, but spectacular first-day gains funnel most of their rewards to IPO underwriters and first-day speculators. Modest IPO gains reward the people who actually helped build a newly public company: venture capitalists, employees, and other early investors.
So what about that long-term value? A10 reported that its revenue rose 18% last year to $141.7 million last year after rising 32% the previous year.
Revenue growth over the last four years has been 37% annually, Chen said. The company has made a business decision to invest in long-term growth, and it has a three- to five-year model to achieve profitability.
A-10 is "playing at the center of four megatrends," Chen said: big data, mobility, security, and cloud computing. Its appliances provide load balancing, application delivery, quality of service, password management, and more. A10 launched a DDOS protection product in January. (See A10 Enters DDOS Protection Market.)
From 2010 through 2013, A10 was weighed down by an intellectual property lawsuit filed against the company by Brocade Communications Systems Inc. (Nasdaq: BRCD). That suit was settled in May 2013. A10 says it hurt it through the direct costs of fighting the litigation and by reducing demand for A10 products due to marketplace uncertainty. Now that the suit has been settled, A10 expects demand to pick up briskly. (See Brocade & A10 Settle.)
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