The San Francisco-based Web company announced the IPO Monday, but did not indicate the number of shares it will offer or their price. However, the IPO registration fee the company paid at its Securities and Exchange Commission filing on Friday indicates it is seeking to raise around $41 million.
RedEnvelope plans to conduct its offering through WR Hambrecht's OpenIPO, or Dutch auction, process. Under the process, investors submit bids with the price they are willing to pay and the number of shares they want to buy. WR Hambrecht then tallies up the highest bid price that will result in the sale of all the shares being offered and that establishes the per-share price for the IPO prior to the market debut.
RedEnvelope's IPO announcement, which comes after a recent show of strength in the stock market, may be aided by signs of recovery in the share price of Overstock.com. The Web-based wholesale and liquidation company has seen its stock bounce back to the same level--around $13 per share--it saw atlast year. In addition, the Nasdaq Stock Market has similarly returned to its year-ago trading levels.
Though a number of companies in all industries are showing signs of stock market recovery, RedEnvelope still faces a challenge in going public, analysts say.
"Eight IPOs (in total for all industries) have been held this year...and we're on track for another year where we'll do less than 100 deals," said Richard Peterson, an IPO analyst with Thompson Financial Services. He noted the small number of IPO deals in the last three years rival that the totals seen in the early 1980s.
Last year, 97 IPOs debuted, of which 24 were companies related to the high-tech industry, Peterson said.
As a Web-based retail company, operates in a sector that remains largely out of favor with Wall Street. Back in the late 1990s, a number of consumer e-commerce companies--from eToys to Pets.com--went public with high stock prices. But by early 2000, a number of these companies were still struggling to show a profit and were among the first casualties of the steep downturn in the stock market.
RedEnvelope declined to comment on its pending IPO, citing a quiet period.
Despite the downturn in the stock market and general reluctance by investors to fund consumer e-commerce companies, analysts are optimistic about RedEnvelope's IPO potential.
"The markets have improved...I think they'll probably be able to pull off their IPO," said Kathleen Smith, portfolio manager of Renaissance Capital's IPO Fund.
While RedEnvelope has improved its financial outlook since last year, its last two private funding rounds--out of six--have been at declining valuations, according to its IPO filing on Friday with the Securities and Exchange Commission. RedEnvelope's valuations dropped to $1.98 a share in the fifth round, then to 64 cents a share in the sixth round, from $4.85 a share in the fourth round.
RedEnvelope posted a $7.7 million net loss on revenue of $70 million for the fiscal year ended March 30, 2003. That compares with a loss of $14.1 million on revenue of $55.8 million in the previous year. The company's cash position, meanwhile, stood at a mere $5 million at the end of its fiscal year.
The Web site said it plans to use the proceeds from its IPO to build up inventory prior to the winter holiday sales season. The company also plans to use the funding for working capital, new capital equipment and information technology budgets.
RedEnvelope intends to trade on the Nasdaq under the ticker REDE.