Zipcar IPO zooms more than 65%

By Hibah Yousuf, staff reporter


NEW YORK (CNNMoney) -- Zipcar shares soared in their market debut Thursday, after the car sharing company's initial public offering raised more money than it had expected.

Shares of the decade-old Cambridge, Mass.-based company opened at $30 per share on Nasdaq, a 67% increase from its offering price of $18. The stock later pulled back to about $28.

Zipcar (ZIP) raised $174.3 million, 31% more than it had originally planned, after increasing the number of shares and pricing them above the proposed range of $14 to $16.

Zipcar said it plans to use the proceeds to pay down debt and expand its network, which already boasts 560,000 members and over 8,000 cars in urban areas and college campuses in the United States, Canada and the United Kingdom.

Investor demand for Zipcar, which allows members to rent cars by the hour or day, was strong despite the company's lack of profitability. In 2010, Zipcar posted a $14.1 million net loss, though sales climbed 42% year-over-year to $186.1 million.

"Zipcar is still in a growth phase, and investors see a lot of potential in it," said Matt Therian, research analyst at Renaissance Capital. "The company has shown rapid revenue growth and positive cash flows, and investors are counting the company to deliver on that track record."

Therian added that Zipcar is saddled with a number of up front costs as it enters into new markets, as it has to buy vehicles and parking spaces in the new cities.

But as business grows, as it has in the company's more mature markets including New York and Boston, revenue from membership fees offers a strong return on those initial investments.

Meanwhile, shares of McDonald's largest franchisee, Buenos Aires-based Arcos Dorados Holdings Inc. (ARCO), also soared in their public debut.

The stock jumped almost 30% to $21.44 per share, after raising $1.25 billion in its initial public offering by selling 73.5 million shares for $17 each.

Arcos Dorados, which is Spanish for "golden arches," operates more than 1,700 McDonald's (MCD, Fortune 500) franchises throughout Latin America.

Investors weren't as enthusiastic for the market debut of Greek shipping company Box Ships Inc (TEU). Shares of the Athens-based firm fell 5%. The company's offering price was $12 per share, below the expected range of $15 to $17 per share. To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed4.04%4.16%
15 yr fixed3.15%3.15%
5/1 ARM3.13%3.15%
30 yr refi4.15%4.23%
15 yr refi3.26%3.22%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,440.59 -127.94 -0.73%
Nasdaq 5,039.78 -48.85 -0.96%
S&P 500 2,067.64 -12.01 -0.58%
Treasuries 2.23 -0.04 -1.89%
Data as of 1:50am ET
Company Price Change % Change
Bank of America Corp... 17.67 -0.23 -1.28%
Freeport-McMoRan Inc... 11.37 -0.92 -7.49%
AT&T Inc 34.32 0.03 0.09%
Apple Inc 122.77 -1.73 -1.39%
Ford Motor Co 14.55 0.16 1.11%
Data as of Jul 27

Sections

Chrysler owners that haven't fixed their recalled cars are eligible for some incentives -- find out if your car is included. More

China's market is spreading investor anxiety around the world and putting Europe -- its biggest trading partner -- on edge. More

Google is scaling back its unpopular social network integrations, starting with YouTube comments. More

NASA has teamed up with Freelancer.com to crowdsource tools for Robonaut 2, its first humanoid robot in space. More