Investors shrugged off litigation concerns surrounding the SkillSoft Corp. (Nasdaq: SKIL) IPO and pushed shares up 4, or 24 percent, to 18 Tuesday.
SkillSoft looks like any other IPO - losses, little revenue, and big plans to enter a burgeoning tech sector - online training. But a look at the company's SEC filings show that, among the boilerplate risk factors, SkillSoft has something exceptional; an executive team who may have to shell out $810 million if found guilty of stealing trade secrets from their former employer.
National Education Training Group, Inc. (NETg) is suing SkillSoft and seeking compensatory damages of $400 million, exemplary damages for an additional $400 million and punitive damages for over $10 million from the company, whose entire executive team is made up of former NETg employees who allegedly stole its trade secrets. The suit was detailed in regulatory filings.
Investors didn't seem to mind. SkillSoft priced 3.1 million shares at $14 each Monday, at the top of their projected range of $12-$14 a share.
SkillSoft offers courses in topics such as management, marketing, sales and strategy. The company has a few smaller competitors but no dominant rival in the corporate training industry.
Some companies with competing technology training courses include: SmartForce, through its Knowledge Well and Tarragon businesses; McGraw Hill (NYSE: HMP), through its Xebec subsidiary; and Harcourt General (NYSE: H) through subsidiaries such as Drake Beam Morin, Knowledge Communications, and, surprise, surprise, NETg the place where all SkillSoft's employees came from.
According to filings with the Securities and Exchange Commission, SkillSoft's CEO, along with other key executives and employees and the company's largest investor, have also allegedly appropriated customer lists and information, and breached provisions of a license agreement with NETg relating to the use of its software.
The litigation will "be costly, divert the efforts of Skillsoft's management, and may ultimately restrict its business," the company said. Skillsoft also said in its filings that its "success depends on the services of Charles Moran and our other executives."
CEO, president and founder Charles Moran, VP of worldwide sales and marketing Jerald Nine, Jr., VP of product development and founder Mark A. Townsend, and other executives, along with Warburg, Pincus Ventures, L.P., which owns 49 percent of SkillSoft's common stock are all defendants in the case.
For the nine months ended October 31, SkillSoft had a net loss of $12.2 million on $2.4 million in revenue. The company reported no revenue for the same period in 1998, but had a loss of $4.7 million.
The IPO underwriters, Credit Suisse First Boston, Banc of America Securities LLC and Thomas Weisel Partners LLC, have been given an extra 465,000 shares to purchase in the event of heavy demand. After the offering, there will be about 12.5 million shares outstanding in the company, according to filings.