Autobytel Soars On Debut
Online car-sales referral service Autobytel took investors on a ride Friday after the new issue opened up 129 percent on its first day of trading.
Shares of Autobytel (ABTL) ended the day at 40 1/4, 75 percent above its $23 IPO. A solid debut for the highly anticipated Net-newbie, particulary since the 4.5 million-share offering had been priced 35 percent above original expectations. BT Alex. Brown led the $103.5 million IPO.
Still, the nice pop is relegated to the lucky few that purchased at the IPO. Investors that placed market orders and held on weren't so lucky. The stock opened at 53 3/4 and rose as high as 58.
"I placed a market order and now I'm being punished for it," said one first-time IPO investor. "I feel like I'm in Vegas but at least there's hope that if I hold on for the ride - it will go up again."
He added: "I thought it would be easier than this."
Internet auto dealers are gaining in popularity because of their competitive prices and because people enjoy shopping for vehicles without feeling pressured by aggressive sales people, analysts say. Autobytel goes as far as saying traditional sales tactics are "high-pressure."
The market opportunity is huge as well. The U.S. auto market, including new and used cars, totaled $667 billion last year, and Americans are buying cars at the fastest clip in a decade.
Autobytel rival Autoweb (AWEB) went public Tuesday at $14 a share and ended the day at 40, a gain of 185 percent. On Friday, it slipped 13/16 to 32 3/4.
Currently, Autobytel generates the bulk of its sales from fees paid by its network of 2,700 subscribing dealerships. The relationships work this way: When a consumer decides to buy an automobile through one of the Web sites, the nearest dealer in the company's network is notified. The dealer then agrees to call the prospective consumer with a haggle-free, competitive offer.
Apparently, some of these arrangements haven't been that smooth. Last year, 556 subscribing dealers ended their relations with Autobytel or were dropped by Autobytel.
Autobytel's advertising strategy, under which it spent more than a million dollars a pop for commercial spots in both the 1997 and 1998 Super Bowls, has cost the company dearly. To be fair, Autobytel appears to be trimming its sales and marketing costs as a percentage of revenues from 155 percent in 1996 to 126 percent last year.
At the close Friday, Autobytel became a $712 million company. Last year, it posted $23.8 million in sales. It has accumulated losses of $43.3 million.
Valley Media (VMIX) rose 4 1/8 to 20 1/8 on its first day. The distributor of music and video entertainment priced 3.5 million shares at $16 a share, the high end of its filing range. J.P. Morgan and BancBoston Robertson Stephens were the bankers behind the deal. Valley Media distributes to 6,000 retailers, including Best Buy, CVS and Toys "R" Us. The company also has 100 online music and video retailes including Amazon.com (AMZN).
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Written By Bambi Francisco, CBS MarketWatch