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.
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.
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.