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Webvan's IPO checks out
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November 5, 1999: 6:39 p.m. ET
After delay, Webvan's offering climbs 66 percent on first day of trading
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NEW YORK (CNNfn) - Internet grocer Webvan Group Inc., which got in trouble for too much news in advance of its initial public offering, had plenty of good news Friday.
Its IPO, which the Securities and Exchange Commission delayed a month due to company officials' comments in news reports and road show presentations to investors, saw its stock jump from an IPO price of $15 to $26 with the first trade of the day. It hit a high of $34 before falling back closer to its open price, closing at 24-7/8, still up 66 percent from its IPO price. The stock was trading on the NASDAQ under the symbol WBVN.
The company originally expected its IPO to price in the range of $11 to $13 a share. That range was raised Thursday to $13 to $15 a share, when it was delayed one more day.
The offering raised $375 million, which will help Webvan fund warehouses to break into markets outside its home in the San Francisco Bay area. It plans to spend $1 billion on that expansion. With total shares outstanding the company has a market capitalization of about $8 billion.
The company has yet to report a profit, losing $35.1 million on sales of only $395,000 in the six months ending June 30. It expects a loss of $73.8 million on sales of $11.9 million in 1999, a loss of $154.3 million on sales of $120 million in 2000, and a loss of $302 million on sales of $518.2 million in 2001, a representative of Goldman, Sachs & Co. said during a roadshow prior to the company's IPO postponement, the company said in its filing with the SEC.
Although the online grocery market has yet to prove itself by making significant money, investors are betting that consumers increasingly over the next few years will be lured by its convenience. Webvan, for example, promises delivery of goods within a 30 minute window specified by the customer.
The Foster City, Calif., company brings some heavy hitters from established businesses with it. Its chairman is Louis Borders, founder of of the nation's second-largest book retailer Borders Group (BGP). Its president is George Shaheen, former head of Andersen Consulting. His comments to Forbes magazine were among the problems reportedly of concern to SEC in delaying the IPO.
"Webvan was all about leveraging technology and reinventing the grocery business, just as Andersen had reinvented consulting," Shaheen said in his interview in Fortune. "Webvan will set the rules for the largest consumer sector in the economy. The creation of 26 distribution centers - each one bigger than 18 conventional supermarkets - will take costs out of the equation."
After that story Webvan's offering was delayed almost a month. While the delay caused some additional buzz at first, the delay may have hurt the price a bit, said Ullas Naik, senior vice president, research, for FAC Equities.
"There was a tremendous amount of hype surrounding the opening," Naik said. "It's a very high profile company, has blue chip investors in it. I was expecting it to do better than it did."
Still the whole business-to-consumer Internet sales sector has lost some luster in recent months as investors focus more attention on business-to-business Internet companies or technology companies, according to IPO experts.
"It (the Webvan IPO) definitely had its challenges, especially with the forced cooling off period," said Ben Holmes president of ipoPros.com of Boulder, Colo., "But that delay had nothing to do with the merits of the deal. The performance tells me that investors looked beyond that. If it works it'll work huge. If it doesn't, it's a crash and burn. I think it was an appropriate reception."
 from staff and wire reports
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