Updated. Apparently, car sharing company Zipcar’s long-awaited IPO is not off! This week, in an amended filing, Zipcar priced its IPO at between $14 and $16 per share for a planned run on the Nasdaq under the symbol ZIP. The company’s 8.3 million shares will net $89.2 million, slightly above the original planned $75 million IPO. Update: Zipcar is reportedly looking to make a run at the Nasdaq on April 13.
Zipcar, which has 560,000 members and was founded in 2000, filed for a planned IPO last June. Then back in December, the company raised $21 million in private financing, which — at least in my mind — called the planned IPO into question. That summer S1 came on the heels of Zipcar arranging to borrow $70 million under a one-year credit facility for the purchase of new cars for its U.S. fleet (through Zipcar Vehicle Financing, a wholly-owned subsidiary), and also came about six weeks after Zipcar acquired its largest competitor in the U.K., a car sharing provider called Streetcar.
Running a car sharing service is expensive and a high-capital business. Maintaining the fleet, and buying new cars, sucks up a major portion of the sales. For the year ending December 31, 2010, Zipcar generated revenue of $186.10 million, with a net loss of $14.12 million. As of December 31, 2010, Zipcar had an accumulated deficit of $65.4 million, and in the company’s risk factors the S1 says, “We expect to incur a net loss in 2011. We do not know if our business operations will become profitable or if we will continue to incur net losses in 2012 and beyond.”
As of September 2010 (when I did this analysis), Zipcar had 8,541 cars in its fleet, most of which it leases, but 1,692 of which it owns outright. The Zipcar fleet is routinely being turned over, and that requires access to capital. Zipcar only keeps its cars, on average, two to three years, after which it sells the cars to the used car market. Zipcar is also constantly removing cars and adding cars to its fleet depending on seasonality (busier in summer and spring) as well as meeting its expansion plans. That’s a whole lot of vehicle financial transactions.
To move to lower-cost vehicle turnover and growth, last spring, the company established “Zipcar Vehicle Financing LLC, or ZVF,” which is “a special purpose entity wholly-owned by Zipcar,” that will be used to purchase vehicles. ZVF currently has $70 million available for vehicle purchasing, and Zipcar plans to increase the amount of owned vehicles in its fleet, compared to the amount of leased vehicles, which can provide a lower-cost way to manage its fleet.
Car sharing needs a lot more members to make it profitable, but analysts have been predicting the market will grow. According to Frost & Sullivan, the revenue from car sharing programs in North America will increase to $3.3 billion in 2016, up from $253 million in 2009.