Columbia network security company Sourcefire Inc. is expected to go public later this week, hoping to raise as much as $77.3 million to fund growth.
Sourcefire plans to offer 5.77 million shares for between $12 and $14 per share, according to documents filed with the Securities and Exchange Commission last week. Of those, 450,000 shares are being offered by stockholders and 5.32 million are for new shares of the company's common stock.
The company's stock will trade on the Nasdaq stock market under the ticker symbol FIRE.
Sourcefire declined to comment on an initial public offering, noting the mandatory quiet period.
But Renaissance Capital, a Greenwich, Conn., IPO research and investing firm, said on its Web site the offering is expected to price this week, possibly Thursday.
David Menlow, president of IPOfinancial.com, an independent IPO research firm in Millburn, N.J., said the lead underwriter of the Sourcefire IPO, Morgan Stanley, told his firm that the deal is tentatively expected to be priced Thursday night for Friday trading.
Morgan Stanley declined to comment.
Sourcefire made headlines in October 2005 when it announced plans to be acquired by Israeli-based Check Point Software Technologies Ltd. for $225 million. The acquisition raised national security issues and came under investigation by the Committee on Foreign Investment in the United States, the same agency that investigated Dubai Ports World's bid to run some operations at six U.S. ports, including Baltimore's.
Check Point pulled out of the deal in March 2006 and in October Sourcefire filed for an initial public offering.
With the Dow falling more than 400 points in one day last week, it may be a volatile time to sell shares to the public.
"If the levels of optimism have been impinged because of the sell-off that we had last week, it will affect the IPOs and how they open in aftermarket," Menlow said.
Even so, he added, for companies with good fundamentals, "the fundamentals will ultimately override the uncertainty that has recently crept into the marketplace."
"Having the backdrop of what's happened in the market last week will make this a little more challenging than it might otherwise" have been, agreed William Smith, president of Renaissance Capital.
But Smith said now is an appropriate time in Sourcefire's development for the company to be going public, and the company's broadly distributed technology gives it an edge over competitors.
There have been 33 IPOs priced so far this year, with the average return up 10 percent from the offer price, according to Renaissance Capital.
Of the last 99 companies to go public, 72 closed Friday above their initial offering prices, according to IPOScoop.com, an IPO information firm in Jersey City, N.J.
John E. Fitzgibbon Jr., founder of IPOScoop.com, says that despite the hit the market took last week, it is not a difficult time for Sourcefire to go public.
"The company itself looks good," Fitzgibbon said.
Menlow, too, believes Sourcefire is a company with a lot of potential. Though it is not yet profitable, the company's revenue grew to $44.9 million last year from $16.7 million in 2004, according to its SEC filing.
"It appears as though this is the breakout year moving forward for them to make themselves a profitable entity," Menlow said.
Sourcefire was founded by Martin F. Roesch, the company's chief technology officer, in his Eldersburg home in 2001. The company now has offices around the world, including sales offices in France, Germany and Sweden.
Its network security software has become an industry leader. Snort, Sourcefire's open-source intrusion-prevention technology, analyzes network traffic to protect against hackers. Sourcefire also makes software to manage that data, as well as real-time network awareness technology, which maps out exactly what the network looks like.
Sourcefire's investors include a handful of venture capital firms and directors and executives of the company, according to SEC filings. Roesch currently has an 8.4 percent stake in Sourcefire. Wayne Jackson, Sourcefire's chief executive officer, owns 4.5 percent, according to the filings.
The company's biggest investor, Sierra Ventures, owns about 29 percent, New Enterprise Associates about 18 percent, Inflection Point Ventures nearly 9 percent, Core Capital Partners 7.6 percent and Sequoia Capital 7.5 percent, according to SEC filings.
The venture capital firms did not return calls yesterday. But according to the SEC filing, they will hold on to most of their shares - something Smith of Renaissance Capital views as a positive. Sierra, for instance, is offering just 255,831 of its 5.1 million shares.
"You prefer that the people who own the stock, know the company best, are holding onto it," he said.
A look at the IPO
Expected offering price: $12-$14 a share
Shares offered: 5.77 million
New shares: 5.32 million
Offered by existing shareholders: 450,000 Over-allotment option: 865,000
Post-IPO shares outstanding: