Private investment firm Comvest Partners acquires the financially troubled e-retailer, which filed for Chapter 11 bankruptcy protection in March.
The long winter in dot-com funding may be over. Pure-play Overstock.com filed for an IPO, following the lead of PayPal’s successful IPO in February.
Spring may be stirring for dot-coms in the long-dormant capital markets. Palo Alto, Calif.-based PayPal Inc. went public on Valentine’s Day. And last month, in one of the only other such moves by a dot-com in the past two years, Salt Lake City-based Overstock.com Inc. filed for an IPO. The company says it will use the proceeds from the $36.8 million it hopes to raise for debt reduction and expansion. Along the way, it may shed the bone-picker image it acquired in its earlier days for sourcing its online merchandise offerings from the inventory of failed Internet retailers.
“People think of us as a vulture, picking over the bones of companies that have just died. But there are a lot of other companies with excess inventories to sell besides those that have just gone out of business,” says CEO Patrick Byrne. Though he says he’d welcome more relationships with retailers having surplus merchandise to move, Byrne now depends mostly on manufacturers’ surplus to stock Overstock’s b2c site.
But Overstock’s bigger opportunity may be in its b2b site, which has gone from zero to 15% of revenues since its launch last fall. A key strategy of the b2b site is to give smaller to mid-size retailers online access to inventory from the surplus goods market, which Byrne says has not been widely available to smaller players.
“I know a jobber who acquired a truckload of Sony electronics who sold it all in five phone calls. He doesn’t want to hear from a smaller retailer who wants to buy a case of six Walkmans,” says Byrne.
But he believes that Overstock’s experience makes it ideal to sell to smaller retailers. “We’re a jobber on the back end and a catalog on the front end. We’re already used to picking onesies and twosies and sending them to consumers, so we’re happy to sell to smaller retailers through our b2b site,” he says. Byrne says that in the past quarter, Overstock has hired 50 sales representatives to develop relationships with target retailers.
Though the company is now in an SEC-mandated quiet period ahead of the IPO, Byrne has been quoted just prior to the filing as saying the company was profitable in December. The company’s quarterly revenues nearly doubled from $7.4 million mid year to $14.3 million at the end of last year, while net loss dropped to $2.9 million from $3.8 million.
“We’ve proved our model,” says Byrne of the IPO. “And it seemed to us that the market window has opened for companies with proven business models to access the public capital markets.” Indeed, PayPal, which facilitates online payment, not only found a receptive audience, but also watched its stock value go up from the initial $13 to $21 the day of the IPO and has rested around the $20 mark ever since.