Zipcar Gearing Up for $75M IPO

Taking a company public now, when the economy is still weak and investors are hesitant to part with their funds, is a daring move. Naturally, purchasing stock at an IPO is an opportunity to get in on the ground floor and realize substantial gains as a company grows. But how does a company garner investors when it has not profited in a decade?

This month, Cambridge, Massachusetts’ Zipcar Inc. filed for an IPO valued at $75 million. While the company’s revenues grew from $13.7 million in 2005 to $131.2 million in 2009, since its inception in 2000, ZipCar has failed to turn a profit. In fact, funds raised from its IPO will first go towards paying down the company’s $5.6 million in debt. (Image courtesy: www.zipcar.com)

“The IPO is not going to solve their net income problem," Andrew White, CFO at financial analysis company Sageworks Inc. said. “You should be able to make a company profitable in ten years."

Zipcar describes itself as a “car sharing” service. Customers sign up for an annual membership online, and then choose a car from a designated parking space in one of 13 cities, or on one of 150 college campuses, across the United States, Canada, England, and Scotland. Zipcar rents its vehicles by the hour or day, with fuel and insurance included in the cost of the service.

“I wouldn’t say it’s a scary place right now, but it’s definitely waning," IPO strategist Bill Buhr of Chicago research firm Morningstar Inc. said. Buhr went on to explain that a $75 million IPO is relatively conservative, and that Zipcar can succeed if it proves to investors that it will make a lucrative long-term investment. Consulting firm Frost & Sullivan reports that the car-sharing market is anticipated to surpass $3 billion by 2016. (Image courtesy: www.zipcar.com)

Goldman Sachs and JPMorgan will underwrite Zipcar’s IPO. The company plans to trade its shares on Nasdaq, with the ticker symbol “ZIP.”

With concerns about protecting the environment growing, the idea of car sharing seems perfect. One has to wonder, though, if a company that has been unable to profit for ten years will ever be able to overcome its costs. Perhaps, a cash infusion from an IPO will give Zipcar the boost it needs to set its company on the track towards profitability.

[Sources: http://bit.ly/bPhaSb, http://bit.ly/cfnYvB, http://bit.ly/95eLmC]