For B2bstores.com, IPO May Be a Matter of Life and Death
Long Beach-based B2bstores.com, which hopes to go public this week, is everything investors love: Its focus is the sizzling area of business-to-business electronic commerce, and it has grand expansion plans.
Trouble is, it has no revenue, only six months of operating history, loans to repay by next month, and its auditor says it might go bust if it doesn’t get the $35 million it wants in its initial public offering.
“If we do not consummate this offering, we may not be able to continue our operations,” B2bstores bluntly said in its Securities and Exchange Commission filing, citing its auditor, New York-based BDO Seidman.
But B2bstores.com (ticker symbol: BTBC) hopes investors will be as enthusiastic about its sale as they were with scores of IPOs last year, when Internet companies rose an average of 90% on their first day of trading.
Firm’s Sector Poised for Enormous Growth
As many investors know, the market for selling products or services to businesses is expected to be far greater than that for selling to consumers, according to Forrester Research Inc., which estimates businesses will buy $1.3 trillion of products online by 2003, up from $109 billion last year.
“There’s no question that’s going to be an enormous [sector]. It’s a no-brainer,” said David DuChene, an analyst at Stamford, Conn.-based SoundView Technology Group.
B2bstores.com would love to be greeted as enthusiastically as Commerce One Inc. (CMRC), which links its top customer, General Motors Corp., to 30,000 suppliers. The stock has soared more than 2,000% since its July IPO, and it was the top-performing sale last year.
B2bstores.com’s chairman, Richard Kandel, has chosen to take the company public early instead of expanding first with money from venture capitalists or private investors--the more common route for start-ups. Because the offering is pending, B2bstores.com and officials at its low-profile underwriter, Bethpage, N.Y.-based Gaines Berland Inc., wouldn’t comment. Gaines Berland has done 12 IPOs in the last six years.
B2bstores.com plans to go public just two weeks before the company must repay a $975,000 loan to Enviro-Clean of America Inc., a sanitary supplies company of which Kandel is the chairman, chief executive and chief financial officer, the SEC filing said.
Company’s Problems Keep Analysts Wary
Some analysts are skeptical about its performance.
B2bstores is “another upstart Internet company being taken to market by a small underwriter,” said John Fitzgibbon, an analyst at Red Herring, an Internet and technology publication. “They’re trying to run it up the flagpole to get a deal done.”
The company’s financial position is “not something that you want to hear, but assuming they go through with the offering, you never know what they can do,” said Mary Lupo, analyst at the Renaissance IPO Fund.
To sell advertising “effectively,” B2bstores.com says, it has to increase hits on its site more than 25-fold to more than 1 million a month from the 40,000 a month it said it was recently getting.
The company had planned to go public last week but delayed the sale--for the second time. The IPO had originally been planned for December. With working capital of $365,849 as of Aug. 31, it needs the money the IPO would bring in, its accountants said in the company’s filing with the SEC.
Of course, one reason B2bstores is rushing into the market is the fierce competition already brewing in the B2B arena.
Among its rivals: Enviro-Clean, which operates the B2bgoods.com site, selling many of the same janitorial and maintenance products.
Kandel would hold 43% of B2bstores.com’s stock after the offering, and Enviro-Clean would retain a stake.
“In this regard, Enviro-Clean could be deemed a competitor of ours,” B2bstores.com said in its filing. And Kandel’s interests could conflict with those of B2bstores.com and its shareholders, the company noted.
