E-tailer Newegg Plans $175 Million IPO
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Online e-tailer Newegg.com has gone from zero to $2 billion in sales in just eight years. Now it wants to go from privately-held to public.
The company filed the paperwork with the Securities and Exchange Commission (SEC) on Monday for an initial public offering (IPO) it hopes will raise up to $175 million.
Located in City of Industry, a small industrial town to the east of downtown Los Angeles, Newegg.com started operations in 2001, about as bad a time as any to get into e-tailing since it was the height of the dot com collapse.
However, the company has been profitable every year thus far, according to the prospectus.
It is a very popular site with hobbyists and enthusiasts who build their own PCs rather than buy a complete system from a vendor. As such, it competes very aggressively with its chief rivals, Amazon (NASDAQ: AMZN) and Best Buy. On sales of $2.2 billion, it earned just $28.4 million, which means its profit margin in 2008 was only 1.4 percent.
The company made headlines last year when it refused to comply with the state of New York's demands it collect sales taxes on sales of items shipped to New York. At the time, Newegg said, "Sales tax is only required for orders shipping into states where we have or may have nexus for state tax purposes under applicable laws."
According to the prospectus, Newegg plans to use $25.0 million from the IPO to expand its international operations, including building an Asian headquarters and a regional warehouse. It will also pay back $8.6 million in loans, and pocket the rest for working capital and general corporate purposes.
Insight Venture Partners owns a 12.7 percent stake in the firm, thanks to a $20 million investment it made in the company in 2005.
The real winner with this IPO, though, will be founder and vice-chairman Fred Chang, who owns 77.4 percent of the outstanding shares. Chang was president of the U.S. company but stepped down to help establish Newegg China in 2008, where he serves as president.
The IPO is being managed by JP Morgan, Bank of America Merrill Lynch and Citi.
Newegg's prospectus did not set the terms or expected timing of the IPO.