Shares of Xoom.com rocketed 6 3/8, or 9.1 percent, to 76 1/2 Monday, after the community site said it held preliminary talks with a major investor about a deal that could result in a change of ownership. NBC, a unit of General Electric, was cited as the party deep in discussions with Xoom.com. The talks began about one month ago, sources close to the company said.
Representatives at Xoom.com declined to comment, citing a company quiet period surrounding its follow-on offering and its quarterly report, expected to be released April 20. NBC had no comment on a potential deal.
As reported on CBS MarketWatch Friday, San Francisco-based Xoom.com said in an addendum to the prospectus for its secondary offering that the company has held talks with "one party with respect to a possible major investment in us that could result in a change of control."
The company has publicly stated often that it continues to move forward as a stand-alone firm but would entertain any bids by interested parties. Xoom.com, however, has never publicly stated that it was in discussions with any particular party.
With Monday's run-up, Xoom.com's stock market value is just over $1 billion, which is 19 times analysts' 2000 revenue estimates. Community site theglobe.com (TGLO) trades slightly below that multiple. Xoom.com's current value is also equal to roughly $142 for each of the company's 7 million member-subscribers. Its members agree to receive product offerings via e-mail, supporting the company's e-commerce direct-marketing strategy.
"A community site such as Xoom.com is attractive because they have a targeted audience," said Mark LaMarre, investment banker at Donaldson, Lufkin, & Jenrette. "It's also natural for a media company to be interested in Xoom.com because media advertisers can segue into the Web audience."
Xoom.com's members disclose more information about themselves, whereas users at other sites can be more anonymous, said Catherine Skelly, Internet analyst at BlueStone Capital Partners.
Traditional retailing companies would find a community site valuable as well, noted Dyan Triffo, a senior investment banker at BT Alex. Brown. Xoom.com provides an "immediately established audience." This is particularly key for traditional or online companies that want to get to market more quickly and have "critical mass."
Xoom.com said earlier in the week that it has slightly more than 7 million member-subscribers. Its members agree to receive product offerings via e-mail, supporting the company's e-commerce, direct-marketing strategy.
In the past couple of months, it has aggressively added a number of free services to acquire more members.
For instance, Xoom.com last month struck a deal with EFax to provide free fax-to-mail service. It also began offering members free, unlimited Web hosting space above the previously available 11 MB level; this service is already in place.
Indeed, Xoom's membership base has grown at a clip of 23,000 members a day in the past several months. Skelly said she expects Xoom.com's membership base to grow to about 18 million by year-end.
On Friday, Xoom.com's stock, which rose 3/16 to close at 70 1/8, had traded lower for most of the day as the market absorbed 4 million shares issued in the company's follow-on offering, which was completed Thursday.
Xoom.com offered 4 million shares at $66, with half of the shares sold by insiders, in the secondary offering. With the offering, Xoom.com raises its cash balance to about $180 million, analysts said. The second round of financing comes just three months after Xoom.com hit the public market last December.
Written By Bambi Francisco, CBS MarketWatch