Q3 IPOs get started with ShoreTel

ShoreTel, a venture-backed provider of Internet telephony services, received a welcome reception to its delayed Nasdaq debut last week, with share price gains likely to generate significant returns for early investors.

The Sunnyvale, Calif.-based company priced its 7.9 million share offering at $9.50 a share, the midpoint of its anticipated range. Shares surged 28% to close at $12.15 in first-day trading last week.

VC firms, which invested more than $110 million in ShoreTel since 1997, stand poised to reap a respectable return should share prices hold up when the lockup periods expire. Venture investors with the largest stakes in ShoreTel include Crosspoint Venture Partners (9.3 million shares valued at $118 million); Foundation Capital (6.8 million shares valued at $86 million); Lehman Brothers Venture Partners (7.6 million shares valued at $97 million); and J.P. Morgan Direct Venture Capital (1.8 million shares valued at $23 million).

Focus Ventures, Globespan Capital Partners, Matrix Partners and Norwest Venture Partners also invested in ShoreTel, according to Thomson Financial (publisher of PE Week), but were not listed in the company’s prospectus as owners of 5% or more of its stock.

The ShoreTel IPO was slated for the last week in June and PE Week last week included the offering in its Q2 IPO wrap up. On the eve of the IPO, however, Kanata, Ontario-based Mitel, a rival IP communications provider, filed a lawsuit against ShoreTel, alleging infringement of four patents. The suit delayed the offering though ShoreTel said in an amended prospectus that it intends “to vigorously defend” it. Still, it was a hectic quarter for IPOs even without ShoreTel as 26 VC-backed companies went public in Q2, raising nearly $4.3 billion, according to Thomson and the National Venture Capital Association.

IPO investors appeared far more interested in ShoreTel’s income statement. The company posted a profit of $4.5 million on sales of $69 million in the nine-month period ended March 31, compared to a $2.4 million profit on revenue of $43 million in the same period a year ago. —Joanna Glasner