Tries to Sell IPO

It bills itself as the company that will knock (AMZN)
off the top of the Internet e-tail food chain.

A brash claim, but you’ve got to be impressed with’s growth in
the past year. With third-quarter revenues of $160 million, up 357% from
Q3 ’98, the company generates more online sales than (EGGS),
CDnow (CDNW)Cdnow, (BNBN)
– indeed, every other pure e-tailer except ($356 million).

Now is ready to launch the next stage of its challenge. The
company last week filed with the Securities and Exchange Commission for
an initial public offering of $150 million. (No share amounts were
specified in the S-1 filing.) Lead underwriter is Merrill Lynch;
plans to trade under the Nasdaq ticker symbol BUYC.

Founded in 1997, claims to carry 850,000 products, though the
majority of its sales come from computer hardware and software.

Still, sales are sales, and makes plenty to new and repeat
customers both. The company reports that repeat customers comprised 48%
of online orders in September, and more than 55% of revenues.

But in order to grow revenues fast enough to go mano a mano against
Amazon, has been selling many items below cost. In the nine
months ended Sept. 30, had a negative gross margin of 0.9%, down
from 4.1% in the same period last year.

The company said it is improving gross margins, and for the last two
quarters that’s true. The Q2 gross margin was -3.3%, while last
quarter’s had improved to 0.5%. (Break out the champagne!)

However, in its S-1 filing, warns investors that “our ability to
become and remain profitable depends upon our ability to substantially
increase our net sales. We cannot be certain that our sales growth will
continue or that we will ever become profitable.”

A warning to heed, especially coming from a company with a $80.5 million
net loss through the first three quarters of 1999, including $33 million
in Q3 alone. Add in 1998’s net loss of $17.8 million, and is
nearly $100 million in the hole.

That’s some hole. And you need better than a 0.5 percent gross margin to climb
out of it.

ALL NEW!’s HotWatch a monthly e-mail subscription for $99,
featuring Internet Stock Report’s top 10 noteworthy Internet stocks for the
month. Each month you will receive in-depth analysis on the top 10 Internet
stocks to watch with the information you need to assess the fast-paced nature
of Internet stocks. Staying on top of market changes in the Internet Stock
market is what counts. For $99 per year, you receive 12 timely issues sent to
you by e-mail. Don’t wait, our next issue will be out before you know it with a
whole new perspective on the market. Sign up today at: e-newsletters

News Around the Web