Autobytel.com Gets Off to a Rapid Start
Autobytel.com, seeking to capitalize on consumers’ growing acceptance of using the Internet to buy things, went public Friday and saw its shares soar 75%.
The stock offering by the Irvine online car-selling service raised $103.5 million on a day that most other technology stocks fell. Its shares, which were priced at $23 Thursday night, opened at $52.75 midway through Friday’s session and rose as high as $58 before settling at $40.25 by day’s end.
That values the company, which lost $19.4 million on sales of $23.8 million in 1998, at $719 million. The valuation makes it Orange County’s biggest publicly held company doing business solely on the Internet.
Online car-selling services such as Autobytel charge dealers for leads on buyers and also make money from the advertising on its Web site.
Increasingly, people are turning to these services not only for information on what car to buy, but also on how to finance it, insure it and sell it. The Web sites also offer reminders on when a car needs servicing and gives alerts to manufacturer’s recalls.
“If they play their cards right, buying a car through them will only be a small part of what they do,” said James McQuivey, an analyst with Forrester Research in Cambridge, Mass.
Autobytel’s debut capped a weeklong series of initial public offerings by dot-com companies, as Internet stocks have come to be known.
On Tuesday, one of its chief rivals, Santa Clara-based Autoweb.com, saw its stock nearly triple in first-day trading, closing at $40. By the week’s end, it had settled at $32.75, valuing the company at $768 million. Autoweb.com lost $11.5 million last year, on sales of just over $13 million.
On Wednesday, MiningCo.com Inc., a search service that employs human guides to help users find information on the Internet, raised $75 million and watched its stock more than double from $25 to $59.
On Thursday, OneMain.com, an Internet service provider for rural areas, raised $187 million and saw its shares climb to $39.56, from $22.
Even companies whose businesses are only tangentially related to the Internet had extremely successful coming-out parties.
On Friday, Woodland-based Valley Media, which distributes music and video to retailers in both the virtual and real worlds, sold $56 million in stock. Its shares jumped 63%, to $26 before settling at $20.13, a more modest 26% gain.
“There’s an increasing view that a dot-com anything is still viable, but that whole theme is going to get old very quickly,” said David Menlow of the IPO Financial Network.
“There is still much more of a demand than a supply for these stocks, and until it swings back, pretty much any dot-com will work.”
Autoweb’s strong debut prompted Autobytel.com to raise its price twice from an initial range of $16 to $18 to the eventual $23.
Of the $103.5 million raised in Autobytel’s offering Friday, the company received about $80.5 million. Company founders Peter Ellis and John Bedrosian each sold 500,000 shares worth $11.5 million.
Ellis and Bedrosian still control 19% and 17% of the company, respectively, although those percentages will diminish somewhat if, as expected, the underwriters exercise their over-allotments of stock.
Friday’s offering by Autobytel was its second attempt at going public. In 1997, the company postponed its offering, citing a tumbling stock market led by weakening technology stocks. At the time, the company had hoped to raise $55 million.
Last year, Ellis stepped down as president and chief executive. Those duties were picked up by Mark Lorimer, a securities lawyer, to strengthen the company’s credibility in the market.
Ellis, a widely known Southern California new-car dealer who went broke during an industry downturn in the early 1990s, founded what was then Auto-By-Tel in 1995 as an alternative way for customers to buy cars.
Most of the money raised in the offering will go into sales and marketing, which for most large Internet retailers make up the single largest cost.
Already, Autobytel is the most well-respected car-selling service among auto dealers, according to a J.D. Power and Associates survey released this week. Autobytel has also advertised heavily, including two consecutive years on Super Bowl television broadcasts, for which it gave NBC stock.
For the car-selling services, a strong brand and tight relationships with car dealers will be the key, said Jill Frankel, an analyst with International Data Corp.
While people visit the Web sites for information, they still must make the deal face-to-face with a car salesperson.
“The main challenge will be to close that loop of having the customer do the transaction online,” Frankel said.
Forrester Research expects that 470,000 cars will be sold online in 2003 and that the Web will influence 8 million car-purchasing decisions that year.
Still, it is unclear that Internet car buyers will necessarily use the likes of Autobytel and its competitors, which include Microsoft Corp.’s Carpoint.com, Autoweb and Cars.com.
Dealers and manufacturers are mounting Internet ventures of their own and, because they have control over the inventory of vehicles, they have some advantages. Manufacturers, for example, could use e-commerce to sell custom-made cars more efficiently, much as Dell Computer Corp. pioneered the sales of computers.
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Hot rods
Here’s a look at the two Internet auto retailers that made roaring debuts on Wall Street this week. Stock prices are per share. Amounts raised, sales and profits in millions.
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Autobytel Autoweb Headquarters Irvine Santa Clara Year founded 1995 1995 Initial stock price $23 $14 First-day close $40.25 $40 % increase 75% 186% Amount raised $103.5 $70 1998 sales $23.8 $13.0 1998 profits -$19.4 -$11.5
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Source: Companies listed, Bloomberg News
