zipcar ipo...Never had profits!!!!

Discussion in 'Wall St. News' started by S2007S, Apr 12, 2011.

  1. S2007S


    This is one of the most anticipated ipos in a while, but what confused me is for the past decade it has never seen a profit, ZERO profits yet people still want on this IPO!!! Come on....enough of the games. Plus the article describes how much more competition exists.

    Zipcar revs up for initial public offering
    Zipcar, the giant of car sharing, has big plans as it goes public, though challenges remain

    Christina Rexrode, AP Business Writer, On Tuesday April 12, 2011, 2:48 pm EDT

    NEW YORK (AP) -- Zipcar Inc., the car-sharing company that rents rides for as little as an hour, is expected to get a warm reception from Wall Street for its planned initial public offering this week.

    Its supporters think skyrocketing gas prices will make car sharing more popular. They praise Zipcar's technological savvy and its plans for overseas expansion.

    Zipcar is "one of the long-awaited hot tickets in the IPO valley," said John Fitzgibbon, founder of Investors are warming up to IPOs again after the market sputtered in 2008 and 2009.

    Still, Zipcar has never been profitable since it was founded in 2000. It expects to lose money again in 2011. Cars, its main expense, don't come cheap.

    The IPO's value would total about $125 million at the midpoint of its expected price range of $14 to $16 per share. Of that, the company expects proceeds of about $89 million, $46 million of which it plans to use to pay down debt.

    The company plans to trade on the Nasdaq Stock Market under the ticker ZIP. The offering is expected to price Wednesday night, with the stock to start trading Thursday.

    Unlike a car-rental program, Zipcar doesn't require customers to visit a store to pick up keys. Rather, members pay a $60 annual fee and $25 application fee to join and get a keycard. Cars are parked throughout their city.

    Members go online to reserve a car nearby, and their keycard unlocks it. Hourly rates vary but are usually less than $10. Customers don't pay for gas.

    Although Zipcar says it has identified dozens more cities where it could succeed, there are questions about just how far it can expand. Its model works best in densely populated areas where many residents don't own cars.

    Zipcar, based in Cambridge, Mass., is a giant among U.S. car-sharing programs, operating in 14 cities. Most of its competitors serve just one. It bought it major direct competitor, Flexcar, in 2007.

    However, rental car companies Enterprise and Hertz have created their own car-sharing programs. Zipcar's smaller rivals also recently formed an alliance called The CarSharing Association.

    Zipcar is quickly expanding on college campuses with cars at 230 colleges, up from 150 in June. Last year, it moved overseas by buying U.K. rival Streetcar Ltd.

    Zipcar says it has pinpointed more than 100 metro areas worldwide and hundreds more colleges as attractive markets.

    "If it works, then everyone's going to make a lot of money," rental-car analyst Michael Millman said. "If it doesn't, I suppose they can always contract to be smaller and profitable."

    Millman said he's not sure if Zipcar's losses so far are a concern.

    "I would assume that if they wanted to have a profit, they could have a profit," he said, "but then they might have to give up or delay growth."

    Investment groups including Norwegian investment firm Smedvig Capital AS and a range of individual investors are also selling shares and will get part of the IPO proceeds.

    Zipcar gets praise for its use of technology: For example, members can get text messages when their reservation is almost up and learn whether they can extend the rental.

    The company counts two tech celebrities on its board of directors, AOL co-founder Steve Case and former eBay CEO Meg Whitman.

    Skyrocketing gas prices may hurt Zipcar in the short term, said Dave Brook, a consultant who founded Carsharing Portland in 1998. But they could eventually drum up interest, he said.

    Brook thinks the tipping point is when car owners drive less than 5,000 miles a year. "That's when you start thinking, 'I'm spending a lot of money on this car and not getting a whole lot of value out of it.'"
  2. Bob111


    i have to track US companies for my portfolio and for last 5-8 years the list is getting smaller and smaller. every month 10-15-20 US companies are out. there is never uptick in this data. exchanges trying to make it look good,replacing US companies with chinese(mostly) companies. that's why whatever you can bring to the exchange as long as it was US based corp will receive a "warm reception ". specially from exchanges and underwriters.
    imo-timing is good for ANY US IPO.
  3. I know one person who uses Zipcar. Maybe I don't mingle with the right people? I don't understand why somebody without a car would not just use the bus instead of zipcar. If I didn't have a car the only reason I would use Zipcar is if I went for a camping trip and the bus didn't reach the area I wanted to go to. But zipcar is too expensive for overnight renting. Really, I would just go camping with a friend who has a car.

    I'm not too optimistic about the Zipcar IPO to be honest.
  4. I use Zipcar and I know a lot of others that use Zipcar. There are a lot of places public transportation doesn't go, or is just too inconvenient. Zipcar is good if you need a car for a few hours. Its not really cheaper than renting if you need a car for more than 8 hours, but is still more convenient.
  5. TGregg


    I remember the height of the tech bubble. We found a company that did absolutely nothing. They admitted it straight up. Stated quite plainly in their paperwork that there were no expenses, no offices, no revenue, no customers, no products, no services, no employees. The whole thing was created with the idea that someday they would buy a company that actually did something. Stock traded every day. Not much mind you, but it did. I think the market cap was 50B or so.

    The crazy stuff you see during the mania. Anybody interested in planting tulips?
  6. The zipcar service works terrific for people who live in high density areas. I am actually bullish on the company. I am not sure, perhaps it could be a case of too much ambition ruining an idea, however the service is really amazingly functional and operationally slick.

    If it makes no sense to you it is likely you have not experienced the hassle of using public transportation or owning a car in a US city. It is great for older people and also late 20's early 30's people without families yet.
  7. I don't know much about this company, other then the basics that we all know, but I did hear someone either on TV or an article who said basically that they feel ZipCar could have make profits fairly easily, but that would have hurt their growth.

    I imagine they are trying to build a national brand/name recognition and once they have a bunch of subscribers locked in and get people used to their system, then they can cut some costs and raise some prices at the same time and start making money.

  8. I checked out the prospectus quickly and it looks like they have some section in the footnotes that discloses what 'mature market' revenue and pretax income contribution is. Based on this, it looks like mature markets are at a 25mm pretax income runrate. New markets are losing money which is credible since it takes some scale before you can become profitable in this kind of model. So if this thing starts trading at 18/share, that would be trading at about 23x mature market EBT, without ascribing any value to their younger markets or expansion opportunities. Not a value multiple of course but the mature markets are also growing at a decent rate themselves and I consider this a good business, so you have to pay up for growth. First look seems attractive to me.
  9. I have been a customer of Zipcar for about 8 years (in NYC and DC). I now live in an area where I have no particular need or use for the service (also have 2 cars now).

    I've always loved the service, and if I returned to those cities I would concurrently re-sign up for membership.

    Whoever mentioned it, yes, for overnight car rental, that's not the primary draw, those it's there if you want it. The hourly rental on demand, easily reserved from multiple parking spots near you, through a easy to use interface has been a great service for me, and likely many others. If I needed an SUV to bring some furniture from a store, just went online,reserved an SUV for 2 hours...

    Oh, and you never paid for gas, and you can get a car wash they'd cover as well (if you cared to, I never did, but cars always seemed to be clean), not sure if these things are the same now.

    If I were taking IPO allocations this is one I would have taken at pricing.
  10. Sh%t....and I would've been up nearly 100% instantly :(.
    #10     Apr 14, 2011