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From hat to herring, red is the color of the bubble.

Now there's

RedEnvelope

(REDE)

, a money-losing online purveyor of luxury goods that Thursday raised more than $30 million in an IPO. The company priced 2.2 million shares at $14.

The deal will give a $120 million market capitalization to a company that posted a loss of $7.7 million on revenue of $70 million for the year ended March 30. For the three months ending June 29, the company lost $1.2 million on sales of $18 million.

Conveniently, the deal creates a market whereby Sequoia Capital and other venture investors can cash out their stakes in the 6-year-old company before coaxing a profit of it. Other major early investors include Direct Equity Partners and Capital Research & Management Company. CEO Alison L. May, who was brought into the company in May 2002 to turn it around, owned nearly 5% of the company before the IPO.

RedEnvelope was founded in 1997 under the name 911gifts.com. The company changed its name in 1999 to focus on online purchases for last-minute gift-giving. In its Aug. 1 S-1 filing with the

Securities and Exchange Commission

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, the company stated that key elements of its business strategy are to "strengthen its brand" and "acquire new customers."

In executing this strategy, RedEnvelope warned that it's in stiff competition with

Amazon.com

(AMZN) - Get Amazon.com, Inc. Report

, Macy's, Bloomingdale's, 1-800 Flowers, Pottery Barn, AOL and

Yahoo!

(YHOO)

, among others. Another major risk is that this Christmas will be the first time the company doesn't outsource order fulfillment, choosing instead to try to improve margins by handling orders itself, an area in which it concedes it has no experience.

The offering was led by Hambrecht & Co., which, along with Pacific Crest Securities, expects to earn about $1.25 million in underwriting fees. The deal was sold over Hambrecht's new OpenIPO process, whereby individual traders have equal access to shares as institutions and may bid what they feel is an appropriate price for a given issue. In this case, the auction produced an actual price in the midpoint of the expected range.