Zipcar IPO Raises $174.3 Million to Fuel Expansion
Photo: jm3, Flickr, CC
From $18 to $27 in a DayZipcar, the North-American car-sharing company, has just raised $174.3 million by selling shares in the company in an initial public offering (IPO) on the NASDAQ (ticker symbol: ZIP). They initially intended to sell 8.3 million shares at around $14-16 each, but interest was high and they ended up selling ±9.7 million shares at $18 each. The bad news for Zipcar is that they could probably have raised even more, since only a day later the shares are already trading around $27 on the secondary market, but this injection of cash should still be enough to help the product-service-system company keep expanding in new markets.
Photo: Wikipedia, CC
Zipcar has a presence in 14 big cities and 230 college campuses around the United States, Canada and the United Kingdom. To expand further they bought Uk's Streetcar Ltd.
The company has incurred losses every year since its creation, mounting to an accumulated deficit of $65 million in 2010, according to a filing with U.S. Securities and Exchange Commission.
Zipcar warned investors of a net loss expected in 2011.
In the filing, Zipcar explained that, as with any other car rental service, many of its expenses are upfront fixed costs of building up the fleet of cars before people actually reserve and pay for them.
Zipcar's revenue, however, has been climbing. It grew 42 percent to $186 million in 2010 after adding 24 percent the year before. (source)
My understanding is that Zipcar isn't profitable because they spend so much to grow, not because their business model can't generate profits. They probably feel that at this point it's more valuable to grow quickly and grab new markets and get a first mover's advantage. Later they'll probably slow down and focus more on being profitable. That's the theory anyway... What matters is that they are economically sustainable so that they stick around and offer a mid-way alternative to city-dweller who don't want to own a car but sometimes need one.
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