Thirteen months after first announcing plans to go public, Bidz.com last week gave up plans for an initial public offering of stock, saying it could not convince enough shareholders to agree to hold onto their shares for 180 days after the IPO.
Instead of hiring an underwriter to manage the sale of shares, the company says it will list its shares initially on the Over The Counter Bulletin Board, enabling investors to sell shares through brokers that choose to buy and sell the stock. Once certain qualifications are met, the company plans to list its shares on the NASDAQ stock exchange, CEO David Zinberg and CFO Lawrence Kong wrote in a letter to shareholders.
“We believe applying to directly list on NASDAQ is the best alternative at this time, as it will provide a solution for those shareholders with an immediately need for liquidity,” they wrote. Asked why the company could not obtain the needed lock-up agreements, Kong tells Internet Retailer, “We have about 1,200 retail shareholders who are not sophisticated and as a result we have not been able to obtain sufficient lock-ups for an IPO.”
Zinberg and Kong also noted the company will not be selling shares, which means the public listing will not generate new working capital for Bidz.com. When it initially announced plans for an IPO last year, the company projected raising as much as $43 million in working capital, a figure it later reduced to $28 million, citing less favorable market conditions. The company said at the time it would use the additional cash to buy merchandise and open a new facility.
However, Kong says the company does not need to raise capital through an IPO. “Since we are profitable we do not need to raise equity funds for working capital,” he says. “Our main objective is to provide liquidity to our shareholders.”
While struggling with its IPO, the company succeeded in selling a lot more jewelry, art and collectibles in 2006 through its online auction site. And it projects additional growth of 29% to 37% this year, which would mean 2007 revenue of $170 million to $180 million.
For 2006, Bidz.com reported revenue of $131.8 million, up 46% from $90.6 million in 2005. Net income more than doubled to $5.4 million from $2.6 million. The company, No. 98 in the Internet Retailer Top 500 Guide, reported that its average order increased 18% to $131, reflecting the purchase of higher-priced inventory.
Average orders per day increased 21% to 3,019 and items sold per day went up 13% to 7,970. The company says it attracted 240,969 new buyers in 2006, up 50% from the year before. The cost of acquiring a new customer went up to $44 from $31 as Bidz.com substantially stepped up its marketing. The company says its operating expenses for the year went up 55% to $25.7 million, primarily due to increased sales and marketing outlays. Also included in that operating expense figure was $1.3 million in expenses related to the IPO.
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