Ready to Ride: Zipcar Prices Upsized IPO Above the Range

Apr.14.11 | About: Avis Budget (CAR)
With strong investor demand on an IPO described as multiple times oversubscribed, Zipcar, Inc. (ZIP) priced approximately 9.68 million shares at $18.00 (original terms were for 8.333M shares at $14-16). Under the original terms, the company was offering 6.67 million shares and the selling stockholders were selling 1.67 million shares, with Smedvig Capital selling 900,891 of that 1.67 million. Other key investors including Revolution Living (of which Steve Case is manager, chairman, and CEO), Benchmark Capital, and entities affiliated with Greylock Partners, were not selling under the original terms. However, the additional 1.4 million of shares in the upsized offering are said to be coming from selling shareholders. The lead underwriters on the offering are Goldman Sachs (NYSE:GS) and JP Morgan (NYSE:JPM).
Zipcar is the leading car sharing network with over 560,000 members, known as Zipsters. It currently has over 8,000 cars located in 14 major metro areas and 230 college campuses. Zipsters pay an annual fee of $60 per year, and can reserve the car of their choice through the reservation system, which is available by phone, Internet, and wireless mobile devices. The cars can be reserved either hourly or daily, and gas and insurance are included in their rates. Cars are located at dedicated parking spots throughout the cities and Zipsters simply pick up the cars using their keyless entry card.
While the company is not yet profitable on a net income basis, and is not expected to be in 2011, Zipcar is a story of growth and market leadership. It's grown its number of members from 42,000 in 2005 to 540,000 in 2010. Revenue over this period has grown from $14M in 2005 to $186M in 2010. The company cites its mature cities as a testimony to its business model. Its first four cities (Boston, New York, San Francisco, and D.C.) had an income before tax of 21% in 2010, up from 13% in 2008. And the following two launches (Chicago and Toronto) went profitable in 2010 with 5% income before tax. Overall the company had an adjusted EBITDA of $4.2 million in 2010.
The company believes the overall market opportunity is approximately $10 billion worldwide. The note that in existing markets it has over 10 million drivers within a 10-minute walk of a vehicle. As far as international growth, the company sees potential in major cities in both Europe and Asia. It purchased Streetcar in Aug. 2010, which represented a leadership position in the London market with over 1,800 vehicles.
While Zipcar is clearly a growth story, it also likes to play the “green” card. The company says that every Zipcar takes 14 vehicles off the road. Whether the company is being viewed as a growth stock or a green stock, one thing is clear: It has plenty of demand for its IPO, and all the publicity surrounding it will only help fuel the company.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ZIP over the next 72 hours.