SciQuest could raise millions with stock

Tech company will sell more

Staff WriterApril 1, 2011 

SciQuest and its investors expect to raise millions more in the Cary technology company's second trip to Wall Street in six months.

SciQuest made its debut on the Nasdaq stock market after an initial public offering of stock in September, the first IPO by a Triangle tech company in years.

On Thursday, the company and its investors announced they will sell at least 4.7 million additional shares and set the price at $14.25 each. The so-called secondary offering will raise more money to expand its business.

"Our goal was to put a mix of new and existing investors in the business, and we were able to add some good ones," said CEO Stephen Wiehe.

Wiehe spent the past two weeks meeting with more than 100 mutual fund managers and other investors in 12 cities, selling SciQuest's story and lining up buyers.

This morning, he will join other SciQuest executives and ring the opening bell at the Nasdaq stock market in Times Square. It's a chance to highlight SciQuest's achievements, but Wiehe noted the incongruity of the date: April Fools' Day.

"We were going to do it after the IPO, but we couldn't find the time," Wiehe said.

SciQuest sells software and services that help customers such as drug companies and universities save money by buying various products online. SciQuest employs 220 people and continues to hire.

In February, the company reported that it's adding customers at a faster-than-expected rate, which bodes well for its future prospects, JMP Securities analysts wrote in a note to investors.

A major risk is increasing competition from established companies such as SAP, as well as emerging rivals such as Paris-based Hubwoo.

Analysts at four Wall Street firms that follow SciQuest declined to comment Thursday because their banks were involved in the secondary stock offering.

SciQuest shares, which began trading at $9.50 each in September, fell 8 cents to $14.52 on Thursday. Selling additional shares dilutes the value of existing ones, and can hurt the stock price, at least in the short term.

The company is selling 1 million shares, which will raise about $12.9 million after expenses. If its investment banks buy more shares, its total haul could reach $15 million.

Investors, including venture capital firms that invested in SciQuest early on, are selling 3.7 million shares, raising more than $50 million and cashing out some of their holdings.

Those firms include Trinity Ventures of California and Intersouth Partners of Durham.

Trinity co-founder Noel Fenton, 72, led the group that helped take SciQuest private in 2004 in a management buyout. He's now SciQuest's chairman and is expected to participate in the Nasdaq ceremony today.

Using a secondary offering is typically less jarring to Wall Street than if shareholders dumped their stock piecemeal on the open market.

And by boosting the number of shares available to trade, a process known as increasing the float, SciQuest is trying to diversify its base of investors. The goal is to attract more investors willing to bet on the company's long-term strategy.

Money for deals

Selling 1 million new shares also gives SciQuest more money for potential acquisitions.

In December, SciQuest used about $13 million of its IPO proceeds to buy a Texas company with technology that complements its e-procurement software and services.

The focus for now is continuing to integrate that deal, Wiehe said.

"We've got to finish the one we've got, then we'll start thinking about the next one," he added.

"Is there a chance we would do another one this year? It's all a function of price and market opportunity."

SciQuest had about $37 million in cash and short-term investments on Dec. 31.

Taking the kids

Wiehe, 47, left for New York on Thursday, taking along his two teenage children with hopes of getting tickets to see "Saturday Night Live" this weekend.

But mostly, he wanted to show his kids "that their Dad actually does something when he's gone for work all the time," he said. or 919-829-4572

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