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ServiceNow IPO to come amid Facebook hangover

SAN FRANCISCO (MarketWatch) -- A market for initial public stock offerings that has cooled in the aftermath of Facebook Inc.'s IPO could see its first signs of reawakening this week when cloud-based software company ServiceNow Inc. makes its public debut.

ServiceNow (NOW) is scheduled to set its IPO price after Thursday's market close. The company plans to offer 11.65 million shares at between $15 and $17 each and begin trading Friday morning. Morgan Stanley, which was the lead underwriter for Facebook's (FB) May 18, IPO, is also the heading up ServiceNow's initial stock offering.

ServiceNow specializes in cloud-based software offerings that businesses use to automate day-to-day operations of data centers and other computing environments. The impression from IPO market observers is that the company is in one of the most-desirable sectors for technology, and for going public this year.

"If there is a company that's in excellent shape for an IPO, it's ServiceNow," said Scott Sweet, director of research firm IPO Boutique, who cited the company's revenue growth and business sector among the reasons its IPO has been eagerly awaited.

In its IPO filing with the U.S. Securities and Exchange Commission, ServiceNow reported a net loss of $5.6 million on revenue of $47.4 million for the quarter ended March 31. During the same period a year ago, ServiceNow earned $3 million on $25.2 million in revenue. The company is on a fiscal-year calendar that ends in June.

And since the start of the year, three other companies in the cloud-based software market have gone public and put in strong stock-market gains. Guidewire Software Inc. (GWRE) went public on Jan. 25 at $13 a share, and its stock is up by 123%, to close Tuesday at $29 a share, while Demandware Inc. (DWRE) shares are up by 58% since debuting at $16 each on March 15, and Splunk Inc. (SPLK) , which went public on April 19 at $17 a share and has climbed 63% to almost $28 a share.

But there still remain some concerns about the IPO market since Facebook went public at $38 a share, and hasn't touched that level over the last month. Facebook's shares on Wednesday traded at around $32 a share, down 15% from the company's IPO price.

IPO market researcher Renaissance Capital said in a report this week that during the second quarter of the year, the number of U.S. IPO deals has fallen 41% from a year ago, to 27 IPOs, and much of that slowdown is due to reaction to Facebook's less-than-stellar debut.

"Facebook's May debut was supposed to prove that U.S. IPOs were back on course," said IPO market researcher Renaissance Capital, in a report this week. "Instead, a mismanaged offering and heightened market volatility led to an abrupt, monthlong shutdown."

And while ServiceNow is seen as being a strong IPO candidate, Sweet said there are no guarantees where IPOs are concerned.

"Going forward, if this IPO were to be mispriced, it would have a catastrophic effect on the IPO market," Sweet said.