Takes.com IPO: No Users, No Revenue, No Problem

It sounds like a cool deal: Getting stock for free from a Net company.

In fact, a variety of companies have been doing just that.

Alas, the Securities and Exchange Commission recently tried to put a stop to this, by cracking down on four companies (one of the companies said it had plans for exploring space).

According to the SEC, these offerings are not really free; after all, in order to get the stock, you must register personal information (e-mail address and so on). Since this information has some type of value, the SEC considers the transaction to constitute a “sale.” Thus, a company must register the offering. This is usually an expensive process, requiring the filing of a prospectus (known as an S-1 filing) and, consequently, many hours with attorneys.

Well, one company,
Takes.com has, er, taken up the SEC on its offer by registering its offering. The lead underwriter is Paradise Valley Securities and the proposed ticker symbol is TAKE (according to the prospectus, the fourth quarter of 1996 was the last time Paradise Valley Securities was a lead underwriter). The proposed price range is $7-$9 and the IPO is expected this week.

Here’s the plan: Takes.com raises millions of dollars in its offering and then starts to give away warrants so long as users visit the site and register their personal information. Users will get additional warrants for return visits, as well. For every 30 warrants, a user can convert this into a share of Takes.com stock.

Started in January 1999, Takes.com has zero revenues (and thus, by deduction, no profits).

Basically, Takes.com says its site will be a portal that is “unique, useful and customizable.”

So far, the site is “Under Construction.” In fact, the prospectus admits that the company has no users.

But this will change, of course, once Takes.com begins its share giveaway. The prospectus predicts: “[W]e expect to rapidly build and sustain a large and loyal cooperative community of users and to develop brand recognition around Takes.com. We believe that by aligning our interests with those of our members, we will be able to deliver a large audience to our advertisers, sponsors and other revenue generating partners.”

Backing? There is no Sequoia Capital or Kleiner Perkins here. Rather, the strategic backer is SpinCycle, which is a Laundromat company based in Arizona.

Okay, here’s how to play this IPO. First of all, don’t pay cash. Forget about getting this one at the offering price. As hordes of users get free warrants and convert these to common stock, there should be substantial dilution whacking the stock price (there are 10 million shares that are slated for the warrant program).

Instead, visit the site often and get as many warrants as possible and then sell them as fast as possible. Oh, and make sure you get a HotMail account (so when Takes.com sells your personal information to spammers, you will not be bombarded with junk e-mails).

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