FairMarket raises $79 million in IPO

Auction network and software provider FairMarket raises $79.05 million in an initial public offering as shares price above their range.

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Auction network and software provider FairMarket raised $79.05 million today in an initial public offering.

Indicating strong demand, the Woburn, Mass.-based company priced its stock at $17 a share, above its previously stated $13 to $15 range. The company sold 5 million shares and grossed $85 million before expenses.

The 5 million shares represents about 19 percent of FairMarket, giving the company a market capitalization of about $450 million before it begins trading. FairMarket will go public tomorrow, with its shares listed on the Nasdaq under the ticker symbol "FAIM."

Deutsche Banc Alex Brown led the offering. Robertson Stephens and U.S. Bancorp Jaffray helped to underwrite it.

FairMarket's offering comes as the online auction market is jumping. Gomez Advisors projects that consumer spending at online auctions will grow from $4.5 billion last year to $15.5 billion in 2001.

To compete with eBay, Yahoo and Amazon.com--the top online auction sites--FairMarket has teamed with Microsoft, Excite@Home, Dell and other portals and shopping sites. Unlike eBay, FairMarket affiliates share their listings throughout the network; a consumer could find the same computer listed on both Dell's auction site and the auction site of fellow FairMarket member Lycos, for instance.

FairMarket developed more than 90 auction sites for its network last year. But the network doesn't appear to have taken much business from either eBay or other auction sites.

The number of items listed on eBay has grown from a million items to more than 4 million in the last year. Meanwhile, Yahoo has seen its auction listings grow from about 200,000 items to more than 1.5 million during the past year.

"Many of our competitors have more experience developing Internet-based software applications and integrated purchasing solutions, larger technical staffs, larger customer bases, more established distribution channels, greater brand recognition and greater financial, marketing and other resources than we have," FairMarket said in a regulatory filing with the Securities and Exchange Commission. "We cannot assure you that the e-commerce solutions offered by our competitors now or in the future will not be perceived as superior to ours by merchants, Internet communities or individual buyers and sellers."

FairMarket lost $16.5 million on $2.1 million in sales last year. In 1998, the company lost $1.4 million on $4,000 in sales.

Microsoft now owns 18 percent of FairMarket, down from 21 percent prior to the IPO. Excite@Home's stake in FairMarket declined from 15 percent to 12 percent, and TicketMaster Online-CitySearch's portion dropped from 8 percent to 7 percent.

Other FairMarket investors include chief executive Scott Randall, who owns 12 percent of the company after the offering, and Sierra Ventures, which owns about 17 percent of the company after the offering.