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Motorcycle IPO revs up
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December 4, 1996: 9:22 p.m. ET
Analysts warn against hopping on mail order motorcycle parts firm
From Correspondent Jody Davis
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NEW YORK (CNNfn) - A chain of motorcycle parts stores is going directly to the people with its initial public offering.
The hitch is that Motorcycle Club USA is not a chain. In fact, it has no stores at all. The first one won't even open its doors until March.
The mail order company's president, Whitey Illegasch, runs the whole operation out of a cramped office in New York City's Greenwich Village.
He is trying to finance the concept by raising $1 million. So he's selling 200,000 shares priced at $5 each.
Instead of having a brokerage firm or investment bank underwrite the issue, the company is using direct mail to sell shares in $10,000 blocks.
Potential investors are contacted by phone from the office. John Hassler, vice president of business development, said he has found investor interest to be high. (166K WAV) or (166K AIFF)
Illegasch began the business after realizing he could get and pass on discounts buying motorcycle parts in volume.
 Motorcycle owners have long complained about the obstacles they face when looking for parts. (603K QuickTime movie)
A car owner in need of a replacement hose, for example, can get one at a good price at a discount auto parts store.
Cyclists don't have that option and have to visit a dealer who charges big markups on parts and accessories.
Illegasch said he tried to follow the same principle as the dealers.
"It behooves the dealer to buy in bulk. This way he can sell at a lower price. That's basically what I was trying to do in building up (these) franchises."
While the idea may appear to be sound, David Menlow of the IPO Financial Network said investors should be wary of IPO's that use the direct approach and sidestep underwriting, accounting, and legal fees.
"These are companies that lack the sponsorship for these underwritings," said Menlow. "They come to market many, many months, if not years, before they should be coming public."
The company hopes to go to market within two months. Shares will trade on the over-the-counter bulletin board overseen by the Nasdaq Stock Exchange.
Analysts who follow the auto parts business said with no track record and no idea how well the business will be executed, the company is an intriguing investment, but could end up being a wild ride. 
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