DVD site makes Wall Street debut
Published: 23 May 2002 17:23 BST
Online DVD rental company Netflix had a successful Wall Street debut on Thursday.
The company set an initial price of $15, at the top of its previously announced $13 to $15 range. It opened at $16.19 on Thursday and rose as high as $17.40, or 16 percent.
Netflix said it would use the $82.5m raised in the initial public offering to pay off $13.7m in debt and for general purposes. The offering was underwritten by Merrill Lynch, Thomas Weisel Partners and US Bancorp Piper Jaffray.
The company charges US consumers a $19.95 per month subscription fee, which allows them to choose movies online and have them shipped out via first-class mail. Subscribers return the DVDs using enclosed mailers. There are no late fees, and customers can rent as many movies as they want during a month, but can only have three movies out at a given time.
Netflix says it has more than 600,000 customers, according to documents filed with the Securities and Exchange Commission. It lost $4.5m in the first three months of this year, a sharp decrease from the $20.6m it lost in the year-ago quarter. Revenue almost doubled year over year, rising from $17.1m in the first quarter of 2001 to $30.1m in the first quarter of 2002.
The company had $15.6m cash on hand as of 31 March.
Investors are probably looking favourably at the company's improving financial picture, said David Menlow, president of IPOfinancial.com.
"Revenue is increasing at a robust pace, and losses are shrinking dramatically. Here's a company that represents the possibility of hitting critical mass," he said.
But that doesn't mean that we're poised for another dot-com deluge in the stock market, he said.
"I'm hopeful that it is a singular situation, not the beginning of a new trend on filings," he said. "We do expect, as the economy stabilises, more deals to make it into the marketplace. But hopefully they will not be dot-com stocks."
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