Web Street Files for IPO, Targets $50 Million

Online brokerage firm Web Street Securities, Inc. has filed for a $50 million (US$) initial stock sale to raise money for expansion and the buildup of its online capacities.

The Deerfield, Illinois-based brokerage firm, run by brothers Joseph and Avi Fox, did not disclose how many shares would be in the IPO, their price range, or other details. However, future filings with the Securities and Exchange Commission are expected to be more elaborate. Fahnestock & Co. will underwrite the offering, and the stock will trade on the Nasdaq Stock Market under the symbol “WEBS.”

More Advertising, Infrastructure Buildup

Web Street said that it will spend some of the money raised from the stock sale on advertisements, billboards and other methods of promoting its products and services. It will also use the proceeds to upgrade its computer hardware and software.

Web Street plans to create a second data center in Arizona to increase the number of customers it can service.

Join the Party

Industry analysts point out that Web Street and some of its more established competitors such as Charles Schwab Corp., E*Trade Group, Inc. and Ameritrade Holding Corp. are positioning themselves in an online market that has just begun to flourish. According to Forrester Research, Inc., there will be about 5.4 million online brokerage accounts — with total assets of $374 billion — by the end of 1999. By 2003, Forrester expects the numbers to swell to 20.4 million accounts, worth about $3 trillion.

However, Web Street has a way to go before it catches up to some of the big players. It executed an average of 4,022 trades a day in the quarter ending June 30, compared with 114,700 online transactions handled daily by industry leader Charles Schwab Corp. It also joins a host of other online brokers that have recently made their Wall Street debuts: National Discount Brokers Group Inc. raised $85.8 million in June, and DLJ Direct, the online brokerage unit of Donaldson, Lufkin & Jenrette Inc., raised $320 million through an IPO in May.

Expanding Internationally

Currently, Web Street provides online brokerage services for individual investors in the U.S, Germany and Iceland. The company plans to expand to Switzerland, Austria, Italy and Luxembourg by early next year.

The international expansion is part of an agreement with ConSors Discount Broker AG, a unit of SchmidtBank, a German online discount broker.

Web Street reported a net loss of $1.2 million in the six months ending June 30, 1999, compared with a net loss of $5.7 million in the same period one year earlier. It pumped out revenue of $10.7 million for the first half of 1999, compared with revenue of $2.1 million in the first six months of 1998.

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