Zipcar, the popular hourly and daily car rental service, is going public, and taking a place in the stock market is a move that may actually be beneficial to consumers.
Zipcar is aiming for a $75 million initial public offering (the exact date of the IPO hasn’t been disclosed), but when any privately-run company goes public, the need to meet Wall Street’s requirements and expectations often comes with some positive side effects. Here are some of the beneficial changes that renters using Zipcar may expect to see in the near future.
More Consumer Control
Potential new investors will be considering Zipcar’s ability to satisfy consumers and how well the company can grow and profit before they place their bets and buy shares.
If consumers don’t get the services and pricing they want, they could vote with their dollars and simply take their money elsewhere. As a result, the company’s profits would fall, causing shareholders’ confidence in their investments to drop as well, potentially leading them to sell their shares.
As a private company, Cambridge, Mass.-based Zipcar has been facing a class-action lawsuit accusing it of charging excessive hidden fees, notes Boston.com.
If Zipcar had been publicly traded when the suit was filed, the company’s stock could have tanked, which would have put more pressure on the company to be clearer about its billing practices than if it was a privately-owned.
Many More Locations
Shareholders want to see company profits that continue to grow over time. When Zipcar is swimming in profits from its existing locations, it would need to open more Zipcar locations across America so that profits continue to grow.
Zipcar lots can currently be found at major cities in 27 states, according to the company’s Web site, but if the company gets more competitive with traditional car rental companies like Hertz (Stock Quote: HTZ), Avis (Stock Quote: CAR) and Enterprise, Zipcars could be found just as easily as the other car rental companies are.
Private companies don’t have to follow the same strict rules that publicly-traded companies have to adhere to according to the Securities and Exchange Commission, but when Zipcar goes public, it will be required to make more detailed disclosures of its financial information under the Securities Exchange Act.
Zipcar will have to provide regular reports to its investors, but anyone can read them. So when Zipcar or any other company happens to raise the rates it charges consumers, you can find out whether your money has contributed to higher executive pay or better offerings for its customers, for example.