Online grocer Webvan Group (proposed ticker: WBVN) is back on the IPO calendar this week, says the offering's lead underwriter.
One of the most widely anticipated initial public offerings in recent months will price Wednesday night for a Thursday debut, Goldman Sachs said Monday. Webvan's 25-million-share offering -- which currently has a proposed price range of $11 to $13 per share -- had been delayed last month after news outlets published reports about the IPO road show for prospective institutional buyers.
Webvan, the brainchild of Louis Borders of Borders Books fame, delivers food, non-prescription drug products and general merchandise, with same-day delivery within a customer-selected 30-minute window. The company, which initially planned to go public in early October, agreed to a cooling-off period after the U.S. Securities and Exchange Commission raised concerns about news reports emerging prior to the IPO. "The company has received and may continue to receive a high degree of media coverage," the company said in an amended registration statement recently filed with the SEC. "Prospective investors should not rely on such third-party statements or any information not contained in this prospectus."
The IPO filing points to a column published Oct. 6 in TheStreet.com that discussed the company's upcoming IPO and made claims that company officials gave institutional buyers on a road show conference call information about the company's outlook beyond its registration statement with the SEC.
"While the factual statements about Webvan in the article are disclosed in this prospectus, the article presented these statements in isolation and did not disclose the related risks and uncertainties described in this prospectus," the company filing said.
Webvan's venture investors include Softbank America Inc., Sequoia Capital and Benchmark Capital Partners. Softbank owns 70 percent of Ziff Davis, the parent of ZDNet.
After going public Webvan will have more than 317 million shares, compared to 259 million currently for Yahoo! (Nasdaq: YHOO) and 337 million for Amazon.com (Nasdaq: AMZN). Although 25 million shares is a much larger float than usual for an Internet-related IPO, Webvan needs the money; in July, the company enlisted global builder Bechtel for a $1 billion, 26-market roll-out over the next three years.
If this week's offering prices at $12 per share -- the middle of its range -- Webvan would net $280.6 million.
Webvan opened its first and so far only distribution center in the San Francisco Bay Area in June, plans to open a second distribution center in Atlanta in the second quarter of 2000 and expand from there. Each distribution center costs about $25 million to $35 million, the company said.
The company has a list of things to do, including expand, hire more people, build brand, boost number of customers and order size, and acheive "favorable gross margins." In the first six months of this year, WebVan had a negative gross margin as it posted net losses of $35.2 million, mostly from ramp-up costs prior to opening its Web store on June 2.
Between that launch and Sept. 30, Webvan generated $4.2 million in sales from 21,000 customers. Average order size was $71, although that rose to $80 between Aug. 31 and Sept. 17. Repeat customers ordered every 10 days on average, although that figure was every six days in June and July.
"In light of our extremely limited operating history, and the daily and weekly fluctuations in our operating data since our commercial launch, we believe the most meaningful operating data, including data for average order size, is the cumulative data since our commercial launch," Webvan says in the IPO filing.
TheStreet.com column referred to a projected net loss of $302 million for the year 2001 that Webvan said today was mentioned by a representative of Goldman Sachs during the conference call with investors. That figure was "based on a number of estimates and assumptions" and that data was not prepared to comply with SEC and other accounting standards, the company says in its latest filing. "Projections are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections were based will not materialize or will vary significantly from actual results," the filing reads.
Webvan does not make projections and in the future does "not intend to make public financial projections," according to the IPO prospectus.
However, the company did say that if its San Francisco distribution center runs at full capacity -- 8,000 orders daily, seven days a week, with an average order size of $103 -- it can achieve an operating margin of 12 percent, compared to 4 percent for a traditional supermarket. If the distribution facility hits "expected" volume and cost levels, it would start generating "significant" cash flow after a year of operation, the company said.
There's no guarantee the center will hit full capacity, Webvan said. At a rate of 1,200 orders daily, its San Francisco distribution center would generate annual income of $35 million, assuming it operates seven days a week. The center currently runs five days a week, the company said.
The company also appeared to back away from statements madeby chief executive officer George Shaheen in an interview with Forbes magazine in the Oct. 18 edition where he spoke about Webvan's business plans. "These statements were not intended to be relied upon by potential investors in making an investment decision to purchase the common stock in this offering," Webvan's IPO now says.>