Buy.com nearly doubles on first day of trading
Shares in the online discount retailer double after a $182 million IPO aimed at raising cash to compete with Net retailers such as Amazon.com.
The Aliso Viejo, Calif.-based discount retailer whose Web sites sell everything from computers to golf clubs sold 14 million shares, or 11 percent of the company, at $13 each.
Shares in the company closed up $12.13 to $25.13, after reaching a high of $35.44, on volume of 30.1 million.
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"Investors are not going to assume up front that they're the next Amazon," Angela Auchey, an analyst at Federated Investors in Pittsburgh. "They're in the running but they're still a 'show me' situation."
Buy.com plans to use the money raised to cover losses incurred while it expands its business. The company is in the red in part because it sells much of its inventory at a loss to generate sales and attract customers to its site.
Buy.com offers 850,000 products, some at deep discounts. The company has nine Web sites offering books, videos and computer games.
While revenue grew almost sixfold to $597 million in 1999, costs grew even faster, rising to $603.7 million. That left Buy.com with a loss of $146 million for 1999.
The company is increasing prices, adding new products and attracting more advertising to reverse its losses, said Buy.com chief executive Gregory Hawkins. "We have raised prices, although we are still the low-price leader," Hawkins said.
The challenge facing Buy.com is to keep customers happy with prompt delivery, then to raise prices while making sure consumers don't defect to rival sites, investors said.
"If they can get things right on the fulfillment side and prove customers are sticky, there's no reason why they can't be another big player," Federated Investors? Auchey said.
The sale of shares, which were sold above the indicated range of $10 to $12, was managed by Merrill Lynch, along with Bear-Stearns, Chase H&Q and U.S. Bancorp Piper Jaffray.