Zipcar soars in first day of trading
The car-sharing company, a leader in its sector, blows past its initial offering price of $18 a share. With video.
Investors seized the hottest initial public offering of the week by far, pushing its stock price to $30 when the market opened. By midday, however, the stock had fallen to $28.30 -- still a nice haul for Goldman Sachs (GS) and JPMorgan Chase (JPM), which managed the offering.
The IPO was widely anticipated by investors, mostly because Zipcar has a strong brand and a firm position in the car-sharing industry. Users reserve cars by phone or computer and then pick up the cars using keyless-entry cards. The service has taken off like a rocket at college campuses and 14 major cities, and the company hopes to expand several times over.
"Zipcar is trading well because it is establishing a new market and they are profitable in a number of their early markets," one analyst told The New York Times. The IPO raised $174.3 million for the company, Reuters reports.
Post continues after this video interview with Zipcar's chief executive:
But Zipcar brings investors a certain amount of risk. The auto industry has taken note of the success of the car-sharing business, and now everyone is jumping in. Car-rental agencies and even car dealerships are exploring the model, and the competition will be fierce.
And then there's Zipcar's missing profits. The company has lost money every year since it was founded, and it expects another loss for 2011. That's because the beginning years are the most expensive, requiring capital to buy vehicles and expand. But Zipcar's revenue was up 42% last year to $186 million.
The GigaOm blog thinks Zipcar's positive reception means the year of the car as a service (as opposed to ownership) has arrived. "It's an example of a whole new economy being built around using the web and mobile technology to share 'stuff,'" writes Katie Fehrenbacher.
Another IPO was also heating up today. Arcos Dorados Holdings (ARCO), which operates McDonald's (MCD) restaurants in Latin America and the Caribbean, raised $1.25 billion after pricing its shares at $17.
By midday, the stock had climbed to $21.40.
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The offering could become the second-biggest this year if underwriters exercise an option to buy more shares.
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