San Francisco-based PeoplePC raised $85 million through the sale of 8.5 million shares at $10 each. The shares will begin public trading tomorrow under the ticker "PEOP."
PeoplePC initially sought to raise about $160 million through the sale of 11.5 million shares at a range of $12 to $14. PeoplePC cut the size of its deal on Aug. 11 after it delayed its pricing on Aug. 9.
Analysts said they were not surprised by the lack of investor enthusiasm for the offering.
"What investors are critical of right now are companies that don't have a legitimate business model," said Paul Bard, an analyst with Renaissance Capital. "Based on the current model, it doesn't look like they're going to be making money anytime soon."
For $24.95 a month, PeoplePC supplies customers with a new computer, unlimited Internet access, an email account and space for a personal Web site. Other Internet service providers, such as EarthLink Network and America Online, offer similar services at a slightly lower cost, but without the free computer.
Early this year, the company announced contracts to supply thousands of employees of Ford Motor and Delta Air Lines with computers. Under these programs, employees can buy computers through affiliate programs, with the employers subsidizing part of the PC costs.
From its founding on March 2, 1999, through Dec. 31, PeoplePC lost $66 million on revenue of $3.4 million. The company lost another $107 million during the first six months of this year on revenue of $18 million.
Chase Hambrecht & Quist handled the sale.