Online automobile seller CarsDirect.com announced Wednesday it has suspended plans for an initial public offering (IPO), saying that the market for new issues is too weak.
“Market conditions today are simply unreceptive to new offerings, prompting us to delay our IPO,” said Bob Brisco, chief executive officer of the Los Angeles-based company, which asked the U.S. Securities and Exchange Commission to withdraw its initial offering documents.
The IPO market, particularly for e-commerce issues, has all but dried up. In November, approximately 27 companies withdrew their SEC registration statements, according to IPO.com.
Last week, PetSmart.com, the online division of pet-supply store chain PetSmart, Inc., ended its plan for a US$115 million IPO because of unfavorable market conditions.
CarsDirect directors said they believe the company can do better on its own. Since filing for an IPO in May, the company has put in place plans that put it “on track to be a profitable, long-term player,” Brisco said.
CarsDirect said it has raised more than $300 million in private equity financing since its May 1999 inception, and had planned to raise $172.5 million in the IPO.
The company had yet to set a price for the shares or determine the number of shares to be sold.
Earlier this week, CarsDirect announced a price guarantee program, and last month, it put in place a new financing service involving multiple lenders, including AmeriCredit, Chase Manhattan and Union Bank of California.
However, the company faces a tough battle, as the idea of online car buying has not resonated with consumers as well as some had hoped. Studies show most car buyers use the Internet for research, but few actually purchase their vehicles online.
While online car buying may be gaining popularity, the going is slow and the stock market is skittish.
Problems at Autoweb, Priceline
Last month, Autoweb.com (Nasdaq: AWEB) announced a 25 percent workforce reduction, saying it would focus on providing car-buying information and customer relationship management. Autoweb shares have been on a steady slide, down from the $14 level a year ago and now trading at pennies per share.
Embattled e-tailer Priceline.com (Nasdaq: PCLN) also had high hopes for online car sales, but last month lost its key auto executive when division head Maryann Keller quit. Press reports quoted Keller, who had been an influential industry analyst before joining Priceline, as saying the idea of online car buying might never catch on.