Zipcar files for an IPO
The car-sharing company is hoping for as much as $75 million in a public offering.
The idea behind Zipcar is simple: Members can reserve one of the company's cars by the hour or day. The reservation includes gas and insurance.
The company has 400,000 members, and 7,000 cars for them to use. But is the stock a buy? Let's get into the numbers:
Zipcar targets people who don't own a car themselves, but need one occasionally for a road trip or for errands like hauling big items. It positions its cars in major urban areas with good public transit systems, for example, and on college campuses.
The company started in Boston, New York and Washington D.C., and after merging with Flexcar expanded operations to places like Seattle, Atlanta and Philadelphia. Now, Zipcar is in 13 major metropolitan areas and 150 college campuses.
Zipcar hasn't said how many shares it wants to offer in the IPO, or at what price. But it has pegged the maximum total offering price at $75 million, according to the Associated Press.
The company's revenue looks good, growing from $58 million in 2007 to $106 million in 2008 and $131 million in 2009. Of course, those figures were helped along by the Flexcar merger in 2007.
Zipcar has never been profitable, but it has reduced its losses from $14 million in 2007 to $5 million in 2009. It will continue to lose money this year. It's sitting on about $30 million in cash and short-term investments.
The company lays out some risks in a regulatory filing Tuesday. First, it must spend money to buy and maintain cars before it can make it back, so it has higher up-front costs. It also gets nearly all of its money from car-sharing, and if that concept fails to take off then Zipcar will be a dud.
The company has high hopes for international expansion -- it acquired London-based Streetcar in April -- but building up new fleets globally will require significant expense.
And since the company only holds on to its cars for two to three years, some of its fortunes depend on the new and used car markets.
Zipcar also has run up about $30 million in debt, although about $2.5 million of that is used to lease cars. It has the green light to take on another $70 million in debt, which it will use to buy more cars. Some IPO money will go to buying more cars and paying down some debt.
The company's chief executive, Scott Griffith, received a $375,000 base salary and a $225,000 bonus last year.
The Wall Street Journal says Zipcar is likely to generate interest as a barometer of the IPO market. Steven Grocer compares Zipcar to Open Table, the online restaurant reservation service that priced its offering at $20 a share last May and now trades for around $40.
The Huffington Post took a poll today and asked if its readers would buy Zipcar stock. About 75% answered yes, while 10% said no and 15% asked, "who wants to share a car with strangers?"
I would buy the stock, although I think Zipcar falls into the "companies I admire and want to succeed" category instead of the "companies I can make big bucks on" category. Zipcar has a simple mission and has developed a strategy to get there.
But will car-sharing ever move out of the niche market and into the mainstream? That's a tough one to answer.
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These companies won't soar like other plays in the sector, but they make for great income sources.
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