Zipcar, Inc., a Delaware registered corporation filed plans to become publicly owned via initial public offering (IPO) on June 1, 2010. Zipcar is a short term urban car sharing rental company that allows renters to pick up cars at numerous designated locations within multiple cities such as Boston, New York and Washington D.C.
According to Zipcar's Form S-1 Registration Statement filed with the U.S. Securities and Exchange Commission (SEC) on June 1, 2010, Zipcar's 2005 revenue had almost increased 958% between 2005-2009 from $13.7 million to $131.2 million.
Zipcar Inc. has claimed a membership base of over 400,000, however its competitive market positioning has not and most likely will not go unchallenged by other rental companies seeking to horizontally integrate their services.
The level of growth the company experienced between 2005-2009 is expected to be non-sustainable according to Zipcar, Inc. which coupled with its fixed costs and equity dilution from the stock offering pose considerable investment risk as specified in the form S-1.
Several million preferred shares already exist for Zipcar, Inc.; following the Zipcar IPO these shares will become common stock according to Zipcar's S-1. The company has reported it expects to collect an amount as high as $75 million from the common stock offering.
The money acquired from the Zipcar IPO is intended to be used to facilitate several aspects of company cash flow including debt aspects of financing, investment via capital expenditures, and operations such as marketing campaigns. Some of the potential investment cautions to take note of regarding the Zipcar IPO are listed below:
• No dividend forecasted
• High fixed costs
• Interest, inflation and foreign exchange risk
• Share dilution
The Zipcar, Inc. IPO will probably need to lead to an increase in profit margin and earnings growth for investors to realize capital gains. Since fixed costs are somewhat prohibitive to this end, and revenue growth is not considered sustainable, a potential gap exists in the investment potential of the Zipcar IPO.
Zipcar needs the money from the IPO to pay off debt and finance operations and not necessarily grow earnings. For Zipcar to realize earnings growth some factors will need to be present following the Zipcar IPO. Some of the variables that may lead to positive gains in future earnings per share (EPS) are listed hereafter.
• Market development and growth
• Increase in revenue in proportion to costs
• Economies of scale
• Gains from company investment
The quality and capacity of Zipcar, Inc. to capitalize and optimize their market positioning with the use of equity capital from the Zipcar IPO is also a factor in how well Zipcar Inc. performs after its proposed IPO.
According to a study cited in Zipcar, Inc's IPO S-1, the combined market for car sharing in North America and Europe is expected to increase in size by over $5.95 billion within 7 years inclusive of June 3, 2010 Euro/Dollar exchange rates. This revenue growth is a key factor in the future success of the Zipcar IPO because without it, the company's current negative earnings structure is more likely to be realized via market inertia.
According to Zipcar's Form S-1 Registration Statement filed with the U.S. Securities and Exchange Commission (SEC) on June 1, 2010, Zipcar's 2005 revenue had almost increased 958% between 2005-2009 from $13.7 million to $131.2 million.
Zipcar Inc. has claimed a membership base of over 400,000, however its competitive market positioning has not and most likely will not go unchallenged by other rental companies seeking to horizontally integrate their services.
The level of growth the company experienced between 2005-2009 is expected to be non-sustainable according to Zipcar, Inc. which coupled with its fixed costs and equity dilution from the stock offering pose considerable investment risk as specified in the form S-1.
Several million preferred shares already exist for Zipcar, Inc.; following the Zipcar IPO these shares will become common stock according to Zipcar's S-1. The company has reported it expects to collect an amount as high as $75 million from the common stock offering.
The money acquired from the Zipcar IPO is intended to be used to facilitate several aspects of company cash flow including debt aspects of financing, investment via capital expenditures, and operations such as marketing campaigns. Some of the potential investment cautions to take note of regarding the Zipcar IPO are listed below:
• No dividend forecasted
• High fixed costs
• Interest, inflation and foreign exchange risk
• Share dilution
The Zipcar, Inc. IPO will probably need to lead to an increase in profit margin and earnings growth for investors to realize capital gains. Since fixed costs are somewhat prohibitive to this end, and revenue growth is not considered sustainable, a potential gap exists in the investment potential of the Zipcar IPO.
Zipcar needs the money from the IPO to pay off debt and finance operations and not necessarily grow earnings. For Zipcar to realize earnings growth some factors will need to be present following the Zipcar IPO. Some of the variables that may lead to positive gains in future earnings per share (EPS) are listed hereafter.
• Market development and growth
• Increase in revenue in proportion to costs
• Economies of scale
• Gains from company investment
The quality and capacity of Zipcar, Inc. to capitalize and optimize their market positioning with the use of equity capital from the Zipcar IPO is also a factor in how well Zipcar Inc. performs after its proposed IPO.
According to a study cited in Zipcar, Inc's IPO S-1, the combined market for car sharing in North America and Europe is expected to increase in size by over $5.95 billion within 7 years inclusive of June 3, 2010 Euro/Dollar exchange rates. This revenue growth is a key factor in the future success of the Zipcar IPO because without it, the company's current negative earnings structure is more likely to be realized via market inertia.
Sources:
1. http://bit.ly/ddd72U (SEC Form S-1 Registration Statement)
2. http://bit.ly/bbgcN4 (Zipcar press release)
3. http://bit.ly/drTHHX (Reuters report: Clare Baldwin)
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