EToys, BarnesandNoble.com Lead IPO Charge (ZD NEWS)
By Kimberly Weisul
05/17/99 12:28:00 PM
The initial public offering market is expecting blockbuster debuts from both eToys and BarnesandNoble.com this week. However, some analysts are anticipating that these two issues could be the last sizzling electronic commerce IPOs for a while.
"The e-commerce side is starting to receive a yawn," said David Menlow, president of IPO Financial Network.
As more companies become public, investors looking to invest in e-commerce have more choices and are less likely to dramatically drive up any single issue.
Nonetheless, Menlow said, "EToys is still strong enough that it's not going to be a problem." EToys has caught the attention of shoppers and investors with a very simple premise: You'll never have to set foot in a Toys R Us again. EToys is the product of incubator idealab!, run by Bill Gross. The company is looking to raise a whopping $98 million, and has about 365,000 customers.
In the fiscal year ended March 31, 1999, eToys had revenue of $30 million - almost equal to its accumulated deficit of $30.8 million. For the year, losses were $28.6 million. The year before, revenue was only $700,000, with losses coming in at $2.3 million.
With the addition of BabyCenter, announced April 19, eToys' financial picture looks substantially worse. Revenue of the combined companies are only slightly higher, at $34.7 million, but losses jump two and a half times to $73.1 million.
None of which is likely to slow the IPO. "In any type of retailing, it's really brand name you're trying to get out there. Brand name means a lot in e-commerce," said Peony Kao, an analyst at Renaissance Capital.
And that bodes well for BarnesandNoble.com, too. The relative latecomer to the Net is far behind competitor Amazon.com in sales - $32.3 million for BarnesandNoble.com's most recent fiscal quarter vs. $293.6 million at Amazon.com - but Kao said it should eventually be a lower-cost operation than its Net-only nemesis. BarnesandNoble.com gets the support of its parent company in inventory, fulfillment, back office and billing functions.
"That should help them keep costs lower and focus more time and money on the marketing of their business," Kao said.
In its most recent fiscal year, BarnesandNoble.com lost $83.15 million on revenue of $61.8 million. Marketing costs were $70.4 million.
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