posted on October 1, 2001 08:56:28 PM new
This is the WSJ blurb:
PayPal Files for an IPO,
Testing a Frosty Market
By Don Clark
Staff Reporter of The Wall Street Journal
PayPal Inc., a popular electronic-payment system, picked a difficult time to try to end the initial public offering drought.
The Palo Alto, Calif., company filed Friday to raise as much as $80.5 million in an initial offering of stock, despite exceptionally weak demand for IPOs and a general stock-market malaise. In fact, September will be the first month since December 1975 in which no IPOs were held, according to Thomson Financial.
PayPal allows people and businesses to use e-mail to send and receive payments, drawing funds from a sender's credit card, bank account or balance in an account at PayPal. As of Sept. 1, PayPal had 10 million user accounts; it completed transactions totaling $746.9 million for the three months ended June 30, its preliminary prospectus states.
Nearly 70% of those transactions came from online auctions, particularly those run by eBay Inc. The prospectus notes that eBay has established a payment system that competes with PayPal.
The document discloses other challenges, some unique to the electronic-payments field. The 596-employee company has stacked up $231 million in losses from its inception in March 1999, including a $27.7 million loss on revenue of $19.9 million for the quarter ended June 30.
Fraud is a big issue. If a credit card is used fraudulently or a card holder disputes a charge for some other reason, the amount of the transaction typically gets charged back to PayPal. The company disclosed it had $8.9 million in charge-backs from unauthorized use of credit cards in 2000, including a "significant fraud episode" between July and October of that year that led to gross losses of $5.7 million. In 2001, as a result of high charge-back rates, the credit-card association MasterCard International fined the company by an unspecified amount, PayPal disclosed.
PayPal's filing cites gains in combating fraud and says its record is better than others in the industry. Though it had a $11 million provision last year for charge-backs and other transaction losses -- compared to just $14.5 million in total revenue -- that amount was only 0.87% of total payments processed. For the quarter ended June 30, 2001, the provision was $2.4 million, declining to 0.33% of total payment volume.
Because PayPal keeps customer balances, officials in California, New York, Idaho and Louisiana have questioned whether PayPal should be licensed and regulated as a bank, the filing discloses. While some state regulators argue it should be, PayPal has argued it shouldn't; but the company acknowledges the law is ambiguous on the matter.
Why PayPal wants to go public now isn't clear, and company officials declined to comment. It has raised nearly $211 million, and had $134.6 million in cash and short-term securities as of June 30. Its filing states it could continue operations for 24 months without additional funding.
PayPal plans to use $10 million to $15 million of the proceeds for collateral requirements to expand transaction processing with outside vendors, about $10 million to $15 million for capital expenses, and the balance for general corporate purposes, the prospectus states.
Citigroup Inc.'s Salomon Smith Barney unit, FleetBoston Financial Corp.'s Robertson Stephens and William Blair & Co. will manage the offering.
Really interesting timing.
I'm going to go read the registration statement -- it should be fun reading.
posted on October 2, 2001 02:45:28 PM new
Consider these two statements from the above article:
> The Palo Alto, Calif., company filed Friday to raise as much as $80.5 million
> in an initial offering of stock
and
> The 596-employee company has stacked up $231 million in losses from
> its inception in March 1999, including a $27.7 million loss on revenue of $19.9
> million for the quarter ended June 30.
I guess in the "New Economy," $80.5 M minus $231 M doesn't result in a net deficit of $150.5 M...
- Dan
----------
This message has been modified from its original version. It has been formatted to fit your brain.
