Zipcar Inc., the car-sharing company that rents vehicles by the hour, said it will seek to raise as much as $75 million in an initial public offering.
Zipcar, which has yet to post a profit since it was founded in 2000, will use the proceeds from the share sale to reduce debt and expand the Cambridge, Massachusetts-based company’s fleet, according to a filing with the Securities and Exchange Commission. Funds may also be used for acquisitions, it said.
The offering would come after at least 20 companies worldwide postponed or withdrew IPOs in May as the European debt crisis sent the MSCI World Index of developed-market stocks down 9.9 percent. Tesla Motors Inc. is also seeking to raise $100 million, while General Motors Co. has said that it may sell shares to the public this year after its 2009 bankruptcy.
“The key for this company is to convince investors it can get to profitability in the not-too-distant future,” said Paul Bard, director of research at Greenwich, Connecticut-based Renaissance Capital LLC, which has followed IPOs since 1991. “Investors love growth, but they really want to see a business model that is capable of delivering strong profitability over time.”
Zipcar, which rents its fleet of 7,000 cars in cities and at universities in the U.S, Canada and the U.K., posted revenue of $33 million in the first quarter, a 29 percent increase from a year earlier, the SEC filing showed. The company’s net loss widened to $5.3 million from almost $3 million, it said.
The car-sharing company operates in 13 metropolitan areas, including London where it acquired Streetcar Ltd. in April. Zipcar has also invested in Catalunya Carsharing SA, the biggest operator in Spain, and plans to expand in Europe.
Zipcar may have opportunities outside urban areas, including customers who want to rent minivans or pickups for the day, according to Jim Hall, principal of 2953 Analytics Inc., an auto-industry consulting firm in Birmingham, Michigan. Investing in those markets may curb profits at first, he said.
“They will have to learn vehicle usage cycles for different markets all over the country and all over the world,” Hall said. “They may have to overstock their car fleet in the early days while they are figuring that out.”
Goldman Sachs Group Inc. and JPMorgan Chase & Co. of New York are managing the share sale.
Zipcar cited Hertz Global Holdings Inc. as one of its main competitors in the filing. The Park Ridge, New Jersey-based company’s shares have lost 7.2 percent this year, compared with a 2.5 percent decline for the Standard & Poor’s 500 Index.
Tesla Motors, the Palo Alto, California-based maker of the $109,000 electric Roadster, filed for an IPO in January to raise capital for factories, acquisitions and equipment.
GM may choose a lead underwriter for its initial offering as soon as this week and sell shares in the fourth quarter, two people familiar with the matter said on May 28. The Detroit- based automaker is 61 percent owned by the U.S.