Security software publisher Entrust Technologies shares surged on the first day of trading, climbing as much as 57 percent on investors' faith in the solid future for Net security.
Entrust (ENTU) on Tuesday sold 7.76 million shares at US$16 each, raising $124 million. The shares opened trading at $22.12 and surged as high as $24.25. After the markets closed, shares were at $20.
The warm reception represents latent demand for security software that will make online transactions safe from hackers' prying eyes, analysts said.
"This is a very high growth area," said Ken Fleming, analyst at Renaissance Capital's IPO fund. "Network security is a big issue, especially with a lot of concern about recent break-ins and networks that have been cracked by hackers."
Entrust, based in Richardson, Texas, writes computer programs that issue digital certificates -- the equivalent of online passports that vouch for the identity of people using computer networks. The certificates guarantee that sensitive documents were sent or received by authorized people.
Investment bank SoundView Financial Group predicts the security marketplace -- including digital certificates, firewalls, and consulting services -- will reach $1.1 billion in 2001.
Entrust was spawned by Canadian telephone equipment maker Northern Telecom (NT). Its competitors include Verisign (VRSN), which also had a powerful IPO last year, and Microsoft (MSFT), which could include similar security features in its upcoming Windows NT 5.0 release.
In its SEC filings, Entrust said it intends to use the IPO proceeds for general corporate purposes, product development, and possibly for acquisitions.
"We are very gratified at the response," said CEO John Ryan. Ryan said the company will focus on the world's 2,000 biggest companies to find customers. "They really are the companies that will proliferate the technology into their customers' hands."
Competitors, like Verisign, run the security operations of behalf of their customers, becoming a "trusted third party" that issues certificates. Entrust sells the software that lets companies issue certificates and manage security themselves. Analysts said Entrust needs to beef up its customer support in order to set up systems quickly and stay competitive.
