As competing booksellers breathed down its neck, Web bookstore Amazon.com today filed for an initial public offering in hopes of raising $33.9 million to pay for anticipated operating losses, capital expenditures, and other general corporate uses, the company announced today.
The company, which aims to launch its IPO as soon as the registration makes its way through the Security and Exchange Commission, will issue 2.5 million shares of common stock; underwriter Deutsche Morgan Grenfell has the option to purchase 375,000 shares.
Amazon.com will be listed on the Nasdaq under the ticker symbol "AMZN."
Craig Bibb, a book retail analyst at PaineWebber, estimated that online book sales currently account for less than one percent of the $16 billion consumer book market, but said last week that figure could grow to as much to six percent in the next six years.
However, it remains unclear whether Amazon.com's high profile will be enough for it to overcome the cool climate for technology stocks and last week's online arrival of Barnes & Noble, to reap rewards similar to those of the heady days of Internet IPOs.
Nevertheless, the company intends to invest heavily in marketing and promotion, site development, and technology and operating infrastructure development. It also plans to offer attractive pricing programs to reduce its gross margins.
The company expects to use a portion of the net proceeds of the IPO to fund its operating losses.
Amazon.com has posted sales of over $16 million and handled about 180,000 customer accounts since it was founded in July 1995. Average daily visits have grown from 2,200 in December 1995 to 50,000 in December 1996. Repeat customers account for over 40 percent of orders, according to the company's prospectus.
The bookseller said it will focus on extending its brand position, providing "outstanding value and a superior shopping experience," and achieving economies of scale.
For the quarter ending December 31, the company reported net sales of $8.5 million, double the net sales of $4.2 million for the previous quarter, which ended September 31.
Amazon.com has also trimmed its net loss slightly from one quarter to the next. The company reported a loss of $2.3 million in the December quarter, down from a loss of $2.4 million the previous quarter. But as of December 31, the company had an accumulated deficit of $6 million, despite continued revenue growth.
In 1996, Amazon expanded from 11 to 151 employees.
Although the company has experienced significant revenue growth in recent periods, such growth rates may not be sustainable.
In January, Barnes & Noble signed a deal with America Online to become the exclusive bookseller on the online service's Marketplace section. It plans to open a Web site in the late spring and compete closely with Amazon.com on price and selection, offering greater discounts than those available in its stores.
In addition, retail heavyweight Borders is also preparing to sell books online.
Amazon.com responded last week, slashing prices up to 40 percent on cover prices for its best-selling books and doubling its inventory to 2.5 million.