Buy.com Inc. may yet be a “buy”,or “sell”,on Wall Street.
The Aliso Viejo-based online retailer recently has made some moves that signal the company soon could go public again.
In late August and again in early September the company updated its January filing with the Securities and Exchange Commission outlining plans for the privately held company to sell $86 million of shares on Nasdaq.
“That shows they’re probably going forward with the IPO,” said Tom Taulli, a Newport Beach consultant who has advised online retailers and wrote a book on initial public offerings.
The absence of a fresh filing within a year of the initial regulatory work often signals an offering is dead, Taulli said.
Trading publicly wouldn’t be new for Buy.com, a seller of CDs, DVDs, electronics and computer gear that launched in 1997.
Buy.com had an ill-fated walk on Wall Street during the dot-com boom, eventually being taken private again by founder Scott Blum in 2001 at a small fraction of what it once traded.
The company’s latest filings, which include improved financial results for the first half of the year, were the first since a February amendment to the original filing.
Company spokeswoman Shaila Arora said, “We’re not releasing any further information regarding the timeline.”
Debt to Founder
Buy.com has tidied up an issue that might have concerned investors.
The company owed some $26 million to Blum’s ThinkTank Holdings LLC, parent of Buy.com, and several other companies. ThinkTank lent Buy.com money to “fund our operations and to meet ongoing obligations,” the company said in a past filing.
The debt was set to be repaid with the stock sale’s proceeds, according to the January filing.
But the latest filings indicate Blum essentially forgave most of the debt. In June, Blum gave the company $20 million in cash.
The following month, the company repaid $20 million to Blum’s ThinkTank Holdings.
ThinkTank still is owed $5.8 million, which is set to be repaid with money raised in the stock sale.
The rest of the offering’s proceeds are set to be used for working capital and possible acquisitions, Buy.com said in a filing.
A fall offering likely would give Buy.com exposure at a time consumers are starting to do their holiday shopping.
“You’ll get some additional buzz,” Taulli said.
The online retailer made a little noise in early September when it launched what it called a “price war” with competitor Amazon.com Inc. Buy.com said it planned to sell in-stock books at 10% less than Amazon’s prices.
The company has had numerous battles over prices and shipping costs with Amazon in the past.
Market Warming
Meanwhile, after a slow start the first half of the year, the IPO market is warming up a little, buoyed by China’s Baidu.com Inc. offering in early August.
The online Asian company saw its stock nearly double on its first day of trading,harkening back to the go-go days of the late 1990s. Shares of Baidu since have fallen by about 50%.
“The IPO market had a tough six months and it started to pick up in August,” Taulli said. “I think the rest of the of the year will be fairly strong.”
Large Internet retail stocks have done well in the past three months, with Amazon, eBay Inc. and Overstock.com Inc. posting healthy gains after a sluggish start to the year.
Shares of Amazon are up about 25% in the past three months, eBay is more than 15% higher and Overstock.com has gained more than 10%.
But this isn’t necessarily a hot market that has to be tapped now, said Alan Mendelson, senior partner at the Costa Mesa office of Latham & Watkins LLP. Deal flow is up, but investors still are hesitant to jump into public offerings, he said.
“I think you’ll see a bit more, but it’s not gangbusters,” Mendelson said. “It remains pretty uneven and choppy.”
Even with a public stock offering there are long-term questions about Buy.com.
The company is a holdover from the tech-bubble days when it was unique just to hawk wares on the Internet.
Today, Buy.com sells the same gear that Amazon.com, CircuitCity.com and BestBuy.com are peddling.
Buy.com isn’t too diversified in the products it sells: Nearly 90% of sales come from technology and consumer electronics products, up from 81% in 2003.
Investors have taken a shine to Internet-based companies with a twist. Brisbane-based Shopping.com doesn’t sell products directly, but finds other Web sites with the best prices.
Shopping.com saw its shares climb nearly 60% on its first day of trading last October and was bought by eBay for more than $600 million in June.
Buy.com’s sales for the six months through June 30 rose 16% to $151 million, versus a year earlier. The company’s net loss narrowed to $6.3 million from $9.9 million a year ago.
Amazon’s sales were $3.7 billion during the six-month period.
Family Ties
Blum, who now lives in Wyoming, owns 98% of the company’s shares. His family also stands to benefit from an offering.
In 2003, Blum’s father and mother-in-law were granted options to buy nearly 700,000 shares at an exercise price of 17 cents each, according to a filing.
The company said Blum’s father, a former technology executive, and mother-in-law provide advisory services, including “advising Mr. Blum on the direction of the business, providing feedback regarding the Web sites and customer service, and recommending new service offerings.”
