Investors Hug Software's New Babies

Have investors gone insane? Last November, software startup PeopleSoft Inc. was overwhelmed by the reaction to its $36 million initial public offering. The first day, shares in the $32 million Walnut Creek (Calif.) company shot up 70%, to 29. Then, on Feb. 3, Powersoft Corp. in Burlington, Mass., raised $71 million in a $20-a-share offering that nearly doubled on its first day of trading--giving the company a stratospheric price-to-earnings ratio of 90. Two days later, investors bid up the IPO of Silicon Valley data-base company Gupta Corp. to 34--nearly twice the offering price and three times the price that underwriters originally asked.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.