PayPal Friday announced it would like to do something that very few privately held companies are doing these days – filing for an IPO (initial public offering of common stock).
The Palo Alto, Calif.-based online payments provider says Salomon Smith Barney Inc., Robertson Stephens, Inc. and William Blair & Company, L.L.C are managing the request. The company itself can’t comment on the situation because it has entered an official quiet period with the Securities and Exchange Commission.
The company’s technology lets any business or consumer with e-mail to send and receive secure online payments. PayPal’s network is based on the existing financial infrastructure of bank accounts and credit cards.
Inside the numbers
PayPal offers its account-based system to over 10 million users in 36 countries
including the United States. In the latest quarter (the one that ended June 30) the company said it processed $663 million worth of payments to business accounts — a measure it refers to as Gross Merchant Sales (GMS).
Indeed, PayPal’s S-1 filing sparked visions of the heady, salad days of the dot-com boom. By the end of the second quarter, the company said its account base was growing by an average rate of 18,000 per day with virtually no traditional sales or marketing.
The fees generated from processing that heavy volume of transactions, as well as other service revenue and investment gains, translated into total revenue of $19.9 million in the 2001 second quarter. For the first half of 2001, revenue totaled $34.2 million, more than twice what the company took in for all of the year 2000.
But PayPal is certainly not in a field by itself. Its competitors are formidable, such as Billpoint, which is now known as eBay Online Payments after the leading online auction site acquired majority control in that entity. In addition, PayPal must compete with Yahoo! PayDirect, MoneyZap and BidPay offered by Western Union, and smaller sites like WorldPay.
Bucking The Trend
Still, the number of privately held companies looking to sell stock has been anemic at best this year and was brought to a standstill by the events on September 11. When the financial markets did reopen, there were no IPOs filed that week; the first time in nearly 30 years.
Overall IPO filings around the globe are down 61 percent since January, according to research firm Dealogic.
And the request for an IPO is no guarantee. Of all the IPOs filed this year with the SEC, two were postponed and 136 have been withdrawn.
Still, the company says it has as good a chance as any based on its past experiences.
“From the very beginning, PayPal set out to change the way people move money by offering a more convenient, more secure and less expensive way to pay for things, and the response has been tremendous,” PayPal Chairman and CEO Peter Thiel said just this month.
The two-time Webby nominee also secured $90 million Series D investment back in March 2001 and worked with the FBI earlier this year to improve online security for payments.