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| Clermont Meridian Trading Outlines Zipcar IPO |
On Thursday, analysts at Clermont Meridian Trading outlined that Zipcar's stock surged 67% on its first day of trading after it was priced well above the intended range and helped the car-sharing company raise $173.4 million.
According to its website, Zipcar, based in Cambridge, Massachusetts, has grown to become the world's biggest car-sharing network since its founders sat in a café and decided to import the European business concept. The company had previously stated that it expected its shares to trade between $14 and $16, but there was enough demand for them to trade at $18 per share on Wednesday night. As soon as the markets opened, Zipcar, which trades on the Nasdaq under the symbol "ZIP," jumped 67 percent to $30.
The company, which operates a capital-intensive model and is revolutionizing the car rental business, sold about 9.7 million shares and raised $174.3 million, which will be used for debt repayment, business expansion, working capital, development of new services, sales, marketing, and capital expenditures, according to the company's public statement,
Zipcar has yet to see profits, having posted a net loss of $14.1 million in 2010 and a loss of $4.7 million in 2009. Regardless, the company is growing aggressively, posting 2010 revenues of $186 million, up 41.9%, and an adjusted EBITDA of $4.2 million in 2010.
The company has shaken the car rental sector by establishing a car-sharing network; according to their website, "car renting is so last century." Zipcar owns or leases over 8,000 automobiles in cities and on college campuses across the United States, Canada, and the United Kingdom, where it recently bought London-based competition StreetCar. Its 560,000 members pay an annual membership fee and then rent automobiles by the hour, including gas and insurance. Traditional rental companies like Hertz and Avis have been forced to adapt, with Hertz launching its own car-sharing service, Connect.
Still, the company's weakness is its exposure to car prices. Andrew Wakefield, Head of Corporate Derivates at Clermont Meridian Trading explains that in the company's filing is exposed to "residual risk" as it bears all the risk of the vehicle's market value and the possibility of disposing of it at a subpar price.
According to Clermont Meridian Trading data, Zipcar has received funding from AOL founder Steve Case's Revolution LLC, Benchmark Capital, Greylock Partners, and Smedvig Capital. The company's bookrunners were Goldman Sachs and JPMorgan Chase.
IPO markets appeared to be reviving on Thursday, with Arcos Dorados, the world's largest McDonald's franchise operator, raising $1.25 billion by selling 73.5 million shares at $17 each; year-to-date, 14 IPOs have been conducted in American markets, raising $16 billion, more than doubling the amount raised in the same period last year. By 1:00 p.m. in New York, Zipcar stock had risen 57.8%, or $10.40, to $28.40, while Arcos Dorados had risen 26% to $21.42.