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NextCard charges out of the trading gate

NextCard, which markets Visa cards solely over the Internet, doubles in its first day of trading.

NextCard, which markets Visa cards solely over the Internet, doubled in its first day of trading today.

The San Francisco-based company rose 13.50 to 33.50 in as about 8.19 million shares changed hands on the Nasdaq stock market. Earlier the shares touched 40.75.

NextCard yesterday sold 6 million shares at $20 each, raising $120 million. The sale represented a 14 percent stake and gave the company a market value of $873.3 million.

The company offers Visa cards through its Web page, which lets consumers apply for credit and find out right away whether they are accepted. Once approved, customers can choose account features and manage their accounts over the Internet.

NextCard said it has granted underwriters Donaldson Lufkin & Jenrette, Thomas Weisel Partners, and U.S. Bancorp Piper Jaffray options to purchase up to 900,000 additional shares.

The company, which was formed in June 1996, said its limited operating history makes business and prospects evaluation and forecasting difficult, according to its filing with the Securities and Exchange Commission.

To date the company has not made a profit and said it expects to incur "significant and increasing" net losses for the next three years. For the period from its inception through December 31, 1997, the company posted a net loss of $1.9 million. For fiscal year 1998 the company incurred a net loss of $16.1 million.

The company said it also incurred a $11 million loss in its last quarter, ended March 31, 1999. In addition, the company said it had an accumulated deficit of $28.9 million as of the end of March.

Also in the filing, the company said that other risk factors include the ability to retain existing customers when the company increases introductory interest rates, difficulties with forecasting due to its untested customer base, and challenges in the successful development of NextCard as a brand name, to name a few.

However, the rapid growth of e-commerce and the company's ability to target customers on the Internet can boost its online credit-card business, the company said.

NextCard said it plans to continue investing "significantly" in marketing, including at least $40 million of the net proceeds of its IPO. The company will continue to invest heavily in the areas of operations, technology, and research.

As reported, Net proceeds from its IPO will be used for general corporate purposes, including working capital, funding of credit card receivables, and potential future capitalization of NextBank. The company is in the process of applying for a charter to form this subsidiary in order to generate and finance credit-card loans, according to today's filing.

Bloomberg contributed to this report.