Game Rental Service Gamefly Files For IPO; Up To $50 Million Raise

Gamefly

So Gamefly finally does file for an IPO, after flirting for years with a possible sale: The Los Angeles-based videogame rental-by-mail subscription service has filed its S-1, and intends to raise a smallish up-to-$50 million through it. It plans to list on Nasdaq under the symbol “GFLY”, and underwritten by BofA Merrill Lynch, Piper Jaffray, Cowen and Company, and William Blair & Company. The money will be used for general purposes, including working capital and sales-and-marketing activities. The exact number of shares to be offered and the price range for the offering have not yet been determined.

The company, founded in 2002 and funded by Sequoia Capital, Tenaya Capital, and others, has a subscription service where it charges about $23 a month for unlimited rentals and game play. For the six months ended Sept. 30, GameFly had revenues of $47.7 million, and $2.97 million in profits, compared with prior-year revenues of $39.4 million and profits of $5.4 million. For fiscal year 2009 ended March 31, it had net income of $4.0 million, on revenues of $84.67 million. It had about 334K subscribers at the end of September last year.

Last year the company expanded beyond online, and partnered with Barnes & Noble (NYSE: BKS) to set up new G-Box Kiosks at various campus bookstores. Blockbuster (NYSE: BBI) also entered into game rentals last year, though BB’s own troubles since have prevented it from focusing on expanding the service.

The big “if” for Gamefly going ahead is digital game downloads, which it says it is getting into as well, a bit like Netflix’s transformation from a DVD-only company.

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