Zipcar IPO Update: Lawsuit Dismissed, Streetcar Still on Hold


UPDATED Zipcar (s ZIP), a Cambridge, Mass.-based startup with the country’s largest car sharing network, has scored a legal victory at home and stepped into a potential antitrust quagmire abroad. The company filed last month to raise up to $75 million in an initial public offering, and its latest filing with financial regulators provides an update on a lawsuit and dealings with antitrust authorities in the UK.

With a fleet of 7,000 vehicles, more than 400,000 members (who can rent the car by the hour or day), Zipcar relies on the web, software, data centers, GPS, mobile networks and other communication tools to provide mobility as a service. The “green” aspect of car sharing services like Zipcar stems from their potential to serve as an early testing ground for cleaner vehicles, and their capacity to help reduce vehicle ownership.

Zipcar noted in its original IPO registration that a class action lawsuit had been filed against the company alleging that certain member fees are “void, unenforceable and/or unconscionable.” While Zipcar acknowledges that other legal challenges may arise in the future, this particular storm has passed, with Zipcar winning a dismissal of the suit “in its entirety, without prejudice” last month.

At least one pothole remains unfilled in Zipcar’s road to a successful IPO and global expansion, however, thanks to a $62 million deal that has caught the eye of UK antitrust authorities. Following Zipcar’s acquisition in April of its largest competitor in the UK — the car sharing provider Streetcar — the UK’s Office of Fair Trading, or OFT, asked Zipcar to hold the two companies separately while it gathered information to determine whether it could review the acquisition.

In its latest filing, Zipcar says it has now entered an agreement with OFT that prevents it from integrating the Zipcar and Streetcar operations until the authorities complete their inquiry, potentially delaying or utterly derailing the integration. (Update: A Zipcar spokesperson emphasized to us today that the inquiry is a “very standard process in the UK.”)

Streetcar is an important tool in Zipcar’s arsenal for increasing its market share in London, a city that Zipcar anticipates could become “one of the world’s largest car sharing markets based on its commuting characteristics, financial burdens of car ownership, demographics and other factors.” But if UK authorities determine “that the transaction may result in a substantial lessening of competition in any relevant market in the United Kingdom,” then Zipcar may have to “unwind the transaction,” a move that the company says would hurt its financial results.

Zipcar has recorded net losses every year since its inception, and by the end of March 2010 it had racked up a $56.4 million deficit. The company expects to lose money again in 2010 and plans to make significant investments as part of a massive expansion effort (Zipcar currently operates in only 14 of more than 100 global metro areas and university campuses where it hopes to set up car sharing).

Already, the company stands as the heavyweight in a growing market. According to forecasts from research firm Frost & Sullivan, the number of drivers using car-sharing networks increased 117 percent between 2007 and 2009 in North America. Within five years, the firm expects to see 4.4 million people in North America and 5.5 million people in Europe sign up for car-sharing programs, more than tripling membership from 2009.

Image courtesy of Zipcar

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