By Keith Regan E-Commerce Times
10/01/01 10:38 AM PT
PayPal is the first Internet company to file for an IPO in
about three months.
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Online payment system PayPal filed for an initial
public offering (IPO) on Friday, looking to leverage its rapid growth and close ties
with auction giant eBay (Nasdaq: EBAY) to help itself raise
as much as US$80 million through a stock sale.
PayPal said that the money it raises will be used in part to provide collateral for the
payments it makes. Other intended uses include development of new
products and additional expansion.
PayPal's registration form with the U.S. Securities and Exchange Commission (SEC) did not
disclose details of the Palo Alto, California-based firm's offering, such as how much
shares would cost or when the sale would take place.
"We seek to become the global standard for online payments," PayPal told the SEC.
To date, PayPal has focused largely on enabling person-to-person payments via e-mail. The
system is already popular with users of eBay and other auction sites, with about 10
million users signed up in the U.S. and 35 other countries.
Targeting Small Biz
In its IPO filing, PayPal said it also wants to grow its share of the online small
business market.
"The small business market presents us with a potentially significant opportunity," the
registration form said.
PayPal cited research showing a significant gap between the number of online merchants
and those that accept credit cards directly.
Word of Mouth
PayPal said its growth has come largely through
viral marketing because consumers must be registered
with PayPal to receive a payment through the system.
However, the firm also acknowledged significant competitive pressures, listing a host of
alternative online payment options, including Yahoo's PayDirect;
eBay Online Payments, which is owned by eBay and Wells Fargo;
and Citibank's c2it, which has close ties to AOL and Microsoft (Nasdaq: MSFT) .
Other online payment systems, including
Flooz.com
and Beenz.com,
have gone out of business in recent months.
Dry Spell
According to IPO.com, PayPal's registration form makes it the
first Internet company to file for an IPO in about three months.
In fact, the filing comes during one of the worst quarters in recent memory for initial
stock offerings. No companies went public during September
and just 11 went public during July and August combined, according to IPO.com.
Last week, Internet retailer X10.com withdrew its IPO, citing the market's uncertainty.
X10.com makes and sells wireless cameras and video equipment -- and made a
name for itself with a widespread
pop-up online advertising campaign
that turned its site, X10.com, into one of the Web's most-visited sites.
Still Losing
One roadblock for PayPal in winning investor attention is the fact that it
has suffered ongoing financial losses. According to its
registration form, PayPal lost $169 million during
2000 on about $14 million in sales.
However, the company has made progress recently, losing
$27.7 million on $19.9 million in
sales for the quarter ended June 30th.
Solomon Smith Barney is listed as lead underwriter of the deal.
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