Here we go again. Buy.com, an e-tailing pioneer that did a respectable job of nipping at Amazon.com's ( AMZN) heels before disappearing into e-tail oblivion, filed once again for -- wait for it -- an initial public offering. You may recall that Buy.com went public five years ago, listed at $27 and fell to less than $1. The company's strategy was to offer electronic goods and books below cost, an approach that proved more popular with customers than with investors. Buy.com had high inventory turnover, but kept posting loss after loss. Founder Scott Blum, a man who knows a bargain-basement price when he sees it, bought back shares in 2001 and took the company private. Now, Buy.com stands again at the gates of the public markets, hat in hand. Like last time, it's using the ticker BUYY. And like last time, it's brought its long string of losses with it. The risk section of the prospectus is like a walk down Memory Lane -- or rather, a dark alley leading off Memory Lane: "Our limited operating history makes evaluation of our business difficult." "Our future operating results may fluctuate and cause the price of our common stock to decline." And who can forget this old classic? "We have incurred substantial losses to date and may not be able to achieve or maintain profitability in the future." These are sentences that were for the most part banished from technology IPO prospectuses after the great stock bust of 2000. But the successful reception of recent IPOs such as Shopping.com ( SHOP), which was priced at $18 last October, seemed to have signaled that investors were warming up again to online retail IPOs. Shopping.com's stock rose as high as $35.62 in early December but was trading at $21.24 Tuesday.
Among the underwriters listed on Buy.com's prospectus, the name on top belongs to RBC Capital Markets, a bank that has had success taking several small companies public last year. Natural-gas provider Copano Energy ( CPNO); medical device maker AngioDynamics ( ANGO) and community bank Harrington West Financial ( HWFG) are trading between 35% and 95% above their initial trading prices. Thomas Weisel Partners and Pacific Crest Securities also are underwriting the Buy.com offering. Buy.com didn't say how much it plans to raise, but it did disclose that some of it would go toward repaying $22.7 million in debt, including $3 million in accrued and unpaid interest. Buy.com paid more than $2 million in interest on those loans in 2004. The debt was provided by ThinkTank Holdings, a Jackson, Wyo.-based venture capital firm that holds 98% of Buy.com's stock. Who is the bold risk-taker behind ThinkTank Holdings? Why, it's none other than Scott Blum. With the IPO, Blum is asking Wall Street to pay himself back for lending money to sustain an enterprise that has not had even a single quarter of operating profit in its history. (Cue Prince's "1999" here.) In Blum's defense, Buy.com is showing steady financial improvement. The company's revenue rose 22% in 2004 to $290.8 million. But that amount is 4% lower than 2002 revenue and 63% lower than its record revenue in 2000. Buy.com also has posted a loss in every single year of its existence, although the 2004 loss of $15.4 million, or 12 cents a share, is substantially down from the 2003 net loss of $25.6 million, or 21 cents a share. Rather than selling products below cost, Buy.com is taking the less-risky approach of undercutting Amazon. A random sampling of some of this month's more sought-after goods shows it is successful at this strategy much of the time.
A 20-gigabit iPod sells for $294 on Buy.com, but they are on order. On Amazon, the iPod costs $5 more but is available to ship in two to three days. The popular Garden State soundtrack sells for $8.98 on Buy.com and a penny more on Amazon; Amazon will ship it within 24 hours, Buy.com in a day or two. The sixth volume in the Harry Potter series can be preordered for $16.19 on Buy.com and $17.99 on Amazon. A battle-scarred survivor of the boom and bust years, Buy.com clearly knows how to carve out a place for itself in the still-growing online retailing industry. What remains to be seen is whether it can stake out a place for itself on the Nasdaq. The offering likely will be an acid test for tech IPOs and how far Wall Street has come in forgiving and forgetting the dot-com years.