More on ValueAmerica from Reuter.
04/08 07:30 RPT-Value America gets set to
go public
By Frances Hong
NEW YORK, April 7 (Reuters) - Taking a tried and proven low overhead cost, no
sales assistance business model from the brick and mortar world, Internet
retailer Value America Inc. <VUSA.O> set to go public Thursday, is hoping its
virtual world will be a long lasting reality.
The Charlottesville, Va.-based firm, which focuses on computer, office and
technology products, not only convinced a range of manufacturers to sell custom
products over its online supershop, but also attracted Microsoft's <MSFT.O>
co-founder Paul Allen to put a stake in its operations. Shadowing a business
model similar to warehouse operator Costco Cos. Inc. But in response to investor
demand, Value America on Tuesday raised the price range for its initial public
offering of 5 million common shares to $20-$22 per share from $15-$17.
All of which begs the question, can Value America shares hold ITS value?
"The main challenge is that a lot of 'e-tailers' out there are already doing the same
thing," said analyst Peony Kao, of the Renaissance IPO Fund. "In fact, some are
significantly larger than Value America. It will be tough competition and pricing
(pressures) will hurt margins eventually."
To meet the challenge, Kao said the young retailer, founded in 1996, must
continually broaden its product offering.
Take a walk down the virtual aisles of Value America's Web site, and products
such as sporting goods, jewelry and household goods can also be found and
purchased from its store. In all, there are over 100,000 products with over 1,000
brand names to choose from. Membership, though not required, is free for now,
with discounts offered to those who sign up.
"But the fact the company has raised its price range, is definitely a good sign,"
added Kao.
David Menlow, president of New Jersey-based IPO Financial Network, agrees.
"Retail investors, without question, are helping to fuel the enthusiasm for the
company," he said. "It's like a herd mentality, with increases because of demand."
How long can the company keep up the price and interest, he queries, "Well, just
how long is a piece of string? It doesn't have the notoriety of say, an iVillage, but
it's another Internet company taking shape in the marketplace and everybody
wants a piece of them."
Much ballyhooed and popular online women's Web site iVillage Inc. <IVIL.O> went
public a few weeks ago, opening at $24 a share, kissing $100 briefly, before
closing at $80.125. At the last minute, underwriters doubled the offering price
from $12-$14 a share to satisfy demand. In Nasdaq trading Wednesday
afternoon, iVillage was down $5.75 at $95.875.
In creating its popularity, Value America has been on a print and advertising blitz,
a strategy, that analysts say has helped increase name recognition.
Its chairman and founder, Craig Winn, took the Price Club model, now Costco,
from his dealings as a manufacturers-rep firm. Former Costco executives now
work for Winn in various capacities at Value America.
This is an IPO the company hopes will keeps its Value and stand up to its name.
((New York Newsdesk, 212-859-1700)) |
