Data storage provider Nutanix soars in market debut

By Sruthi Shankar and Heather Somerville

(Reuters) - Shares of Nutanix Inc (NTNX.O), an unprofitable but growing provider of enterprise data storage, soared more than 130 percent in their market debut Friday, highlighting demand for tech offerings in what has been a generally quiet year for IPOs.

Nutanix's stock opened the day at $26.50, valuing the San Jose, California-based company at $3.6 billion, a leap above the $2 billion valuation it received in its last private funding round in 2014.

At the closing bell, shares were priced at $37, a 131 percent pop from the IPO price of $16.

Nutanix sold 14.87 million shares on Thursday, more than the expected 14 million, and priced them above the anticipated range of $13 and $15, to raise about $238 million.

After getting strong encouragement from investors, the company kept nudging up the asking price for shares from the $11 to $13 range set early last week, co-founder and Chief Executive Officer Dheeraj Pandey said in an interview on Friday.

"Based on all that feedback, we thought it was the right thing to do," he said. Pricing "is not a science, there is a lot of art in the process."

Nutanix's higher-than-expected valuation and first-day pop demonstrated that once-skeptical public investors are again hungry for shares of technology companies that are growing, even if they are not yet profitable.

Recent tech IPOs including Square Inc (SQ.N), Apigee Corp. (APIC.O) and Box Inc. (BOX.N) had to price IPOs below private market valuations as investors worried about their potential to grow.

Seven-year-old Nutanix has been running up losses over the past few years, mainly due to rising expenses. Its net loss rose by a third to $168.5 million in the year ending July 31 but revenue jumped 84 percent to about $445 million. On the public market, it will face mounting pressure to become profitable.

Nutanix is a pioneer in "hyperconverged" infrastructure, or technology bringing together server, storage and virtualization software in one machine. It has been sharpening its focus on cloud computing, and last month acquired two startups to boost speed and performance of its cloud platform.

Nutanix had 3,768 end-customers as of July 31, its IPO filing showed, including Activision Blizzard Inc (ATVI.O), Best Buy Co Inc (BBY.N) and Nintendo Co Ltd (7974.T). It has more than 2,000 employees; about 100 descended on the Nasdaq trading floor Friday to celebrate.

Choppy market conditions discouraged Nutanix and many other companies from going public for much of 2016, although activity has picked up in recent weeks.

Nutanix filed for its IPO in December, anticipating a January debut, but Pandey said the company stayed on the sidelines due to a slump in enterprise stocks at the start of the year along with volatile financial markets.

"We waited for the angst in the market to go away," he said

Money raised from IPOs fell by more than a third to $79.2 billion in the first three quarters of the year, the slowest such period since 2009, Thomson Reuters Equity Capital Markets (ECM) data showed.

Nutanix raised about $317 million from venture capitalists including Lightspeed Venture Partners, Khosla Ventures and Blumberg Capital.

Goldman Sachs & Co, Morgan Stanley & Co LLC, J.P. Morgan Securities LLC and RBC Capital Markets were among the offering's 12-member underwriting syndicate.

(Reporting by Sruthi Shankar in Bengaluru and Heather Somerville in San Francisco.; Additional reporting by Supantha Mukherjee; Editing by Ted Kerr and David Gregorio)