Salt Lake-based Overstock.com Inc. has made a name for itself selling closeout inventory at discount prices on the Internet. Now the company is working to attract investors looking for a bargain.
The company on Wednesday raised $39 million in its initial public offering, selling 3 million shares of common stock at $13 per share. The company had expected the IPO price to be between $12 and $16.
In early trading Thursday on the Nasdaq Stock Market, under the symbol "OSTK," the company's shares were up 40 cents, or about 3 percent, to $13.40.
More than 2.1 million shares were offered by the company and 845,000 by Amazon.com in Wednesday's IPO. Both granted the underwriters — WR Hambrecht & Co. and Cantor Fitzgerald & Co. LLC — an option to buy 450,000 more shares to cover any over-allotments.
Hambrecht used an "open IPO" method that involves a "Dutch" auction process to determine the public offering price and allocation of shares. Overstock is the seventh company to use the auction process and the first this year.
The company on May 6 had boosted the number of shares available, from 2.5 million to 3 million.
Overstock had $1.8 million in revenue in 1999, but that ballooned to $25.5 million in 2000 and $40 million last year. This year's first quarter also was strong, with $12 million in revenue, up from $9.6 million a year ago.
But the company has posted losses attributed to common shares, amounting to $8.7 million in 1999, $21.5 million in 2000 and $14.2 million last year. It lost $9.7 million in this year's first quarter, up from $3.4 million in the 2001 first quarter.
The company said in a Securities and Exchange Commission filing that it may continue to incur operating and net losses for the foreseeable future.
"We will need to generate significant revenues to achieve profitability, and we may not be able to do so," it said in the filing. "Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis in the future. If our revenues grow more slowly than we anticipate, or if our operating expenses exceed our expectations, our financial results would be severely harmed."
The company, with 147 employees, is led by Patrick Byrne, 39, president and chief executive officer.
The company said it intends to use about $3 million of the IPO proceeds to repay debt to High Meadows Finance LC, which is owned by High Plains Investments LLC, an entity controlled by Patrick Byrne; John J. Byrne Jr., a member of the board of directors; and Cirque Properties Inc., an entity owned by John J. Byrne III, Patrick Byrne's brother.
Overstock offers about 4,000 products through two Web sites. It makes money directly through sales to consumers and business-to-business transactions, and from commissions from those types of sales. It processes the activities through its Salt Lake warehouse.
Overstock's IPO follows two other Internet-related IPOs this year. DVD rental company Netflix Inc. had its offering last Wednesday, and payment company PayPal Inc.'s was in February. In 2000, there were 98 Internet-related IPOs, but the figure dwindled to one last year.
Last week, Lindon-based Altiris Inc. had a poor debut on the market, closing last Thursday at $8.87 after hoping to sell 5 million shares of common stock between $10 and $12. Altiris stock early Thursday was at $8.25, down 20 cents from Wednesday's close. It has ranged between $7.86 and $9.41.
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