Overstock.com files for IPO
The discount retail site files to raise up to $37 million in an initial public offering, at a time when Wall Street has all but given up for dead most e-tail stocks.
In a filing with the Securities and Exchange Commission, Overstock did not disclose how many shares it would sell.
Financial services firm WR Hambrecht, which operates an auction-like system to distribute IPO shares to the public, is managing the offer. The company has requested to trade under the ticker symbol "OSTK."
Overstock is one of the Web companies often referred to as "Internet vultures." During the dot-com die-off, Overstock scrambled to the headquarters of distressed Web companies in the hopes of picking up excess inventory for cents on the dollar. Overstock would then offer the goods, as well as merchandise obtained in traditional liquidation sales, over the Web.
Overstock swooped in to snag merchandise from online companies such as Toytime.com and luxury goods Web store Miadora.com, both of which shut down in 2000. Salt Lake City, Utah-based Overstock acquired online sporting goods site Gear.com in October 2000 after the company had fallen on hard times.
One of the first companies to take advantage of the Internet shakeout, Overstock saw a slew of other competitors, which included established liquidation companies, descend on broken-down Internet companies. The pickings have nearly dried up, as e-commerce companies have gone out of business, been acquired or caught on with the public.
Overstock generated $40 million in revenue last year, up 57 percent from the previous year, and narrowed its net loss to $13.8 million. It had a net loss of $21.3 million the year earlier. Overstock has seen its quarterly operating costs decline by 94 percent over the last eight quarters.
The company, which had $3.7 million in cash at the end of last year, had a bank debt of $3 million that was due June 1. The two-year-old company never received venture funding, despite its existence during the Internet boom. Documents show that Overstock received more than $6 million in private investment Monday. Amazon.com owns more than 7 percent of Overstock.
Tricky timing
In the down economy, the number of public offerings has practically grinded to a halt. So far this year, there have been 11 IPOs, down from last year when 16 companies went public by this time, said Rich Peterson, market analyst for Thomson Financial. For 2000, 75 companies had gone public by March.
E-tail companies that have chosen to test the stock markets are rarer still. Peterson said the last Web-only retailer to file for an IPO was VarsityBooks.com on Feb. 15, 2000. The online bookstore changed its name and trades on Nasdaq's small-cap market.
"We're at the slowest pace for nearly a quarter century," Peterson said. "Against the backdrop of Enron and accounting scandals, this isn't the best of times for IPOs.
As for WR Hambrecht, the IPO couldn't come at a better time for the struggling financial services company. WR Hambrecht, which has gone through a series of layoffs in recent months, operates an auction-like format in distributing shares of a company to the public, a system WR Hambrecht calls "OpenIPO." In this type of IPO, individuals are allowed to bid on shares prior to public trading. Specifically, investors can submit bids with the price they are willing to pay and the number of shares they want to buy.
As a result, an individual who is willing to pay the same price as a large, institutional investor can acquire the shares.
WR Hambrecht then tallies up the highest bid price that will result in the sale of all the shares being offered. The last IPO that WR Hambrecht managed was 10 months ago, for restaurant and food company Briazz.
The asking price for Briazz was $8. As of Monday, Briazz closed trading at $1.56. WR Hambrecht also took Peet's Coffee & Tea public in January 2001 and found more success. The asking price was also $8 and the stock closed trading Monday at $15.57.
Tech IPOs that WR Hambrecht has handled are news site Salon.com, chipmaker Nogatech, and Andover.net, a collection of open-source and Linux information sites. Nogatech and Andover.net were acquired by other companies and Salon was delisted from the Nasdaq Stock Exchange's national market last August and now trades on the exchange's small-cap market.
Overstock's IPO filing comes less than a month after online payment site PayPal went public. PayPal floated 5.4 million shares and they opened at $15.41 per share, more than 18 percent above the $13 price set by underwriters. The stock closed at $20.09, making a 54.5 percent gain. Since then the stock has dipped and was trading Tuesday for $17.06.