Newegg Announces IPO

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According to this filing with the Securities and Exchange Commission, the folks at Newegg are going public.

We believe our success is driven by consistently executing on three core competencies, which we call our “Three Pillars”: delivering a compelling online shopping experience, fulfilling customer orders in a reliable and timely manner and providing superior customer service. We have built a strong brand and a loyal customer base consisting primarily of IT professionals, gamers, do-it-yourself technology enthusiasts, early technology adopters and CE enthusiasts. In 2008, we attracted 70.7% of the unique daily visitors to our U.S. website without incurring a referral, click-through or advertising fee, and generated 74.1% of our U.S. orders from customers who have previously purchased from us.
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DonInKansas said:
Will their stock overclock well? :p
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hehe. The only thing I hope does not happen is that their service suffers due to shareholder "cost" concerns. I have been shopping the Egg for years now and whenever I have a issue with a product, it's always taken care of even if it costs them money to make it right.
 
Very nice for Newegg; interesting to see their public financial information with their margins being as low as they are, thus is the nature of the reselling business.
 
I've been waiting for this for the past six or seven years...I'll definitely be a buyer (after seeing the financials of course).
 
I saw their financials and they have a really low profit margin *shudders* Some people were saying that from such low margins it results in poor internal management... but either way it's a hit or miss if you buy IPO from newegg... I wonder how much per share they will offer?
 
2billion in sales but only 28 million in profit...eh....good company but the IPO might blow. I really hope they don't downgrade there service to meet the greed of shareholders or i'll be bolting to another retailer very quickly.
 
I see the shipping cost going up and the customer service going down with in the next couple of years.

I could be wrong, I hope I'm wrong, but I'm still sad.
 
this sucks. Looking back though I haven't bought from newegg in a few years due to price and restrictions on where i can ship when buying with paypal. I just like their site for its organization.
 
newegg goes public with this i give it less then 2 years they get bought out by a brick and mortor just to eliminate them undercutting prices one everything..
 
dajet24 said:
newegg goes public with this i give it less then 2 years they get bought out by a brick and mortor just to eliminate them undercutting prices one everything..
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That would REALLY suck! Hopefully Newegg has more pride than that and it doesn't happen. I would be cool if Newegg had their own B&M stores though (as long as their prices were the same as online). But honestly, I would just prefer to buy online and save tax while getting free shipping (most of the time).
 
Waypo said:
I see the shipping cost going up and the customer service going down with in the next couple of years.

I could be wrong, I hope I'm wrong, but I'm still sad.
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Pretty much what I expect to happen. Once companies go public they have to answer to their major shareholders. They'll start doing anything to cut the overhead and increase profit margin.
 
How do you buy stock for an IPO.. just go to a place like tdameritrade.com and get some or do you have to call a broker for an IPO?

I have never in my life bought stock and probably wont get newegg stuff but the Google IPO kicked ass and I was always curious how its done..
 
Frozen8950 said:
How do you buy stock for an IPO.. just go to a place like tdameritrade.com and get some or do you have to call a broker for an IPO?

I have never in my life bought stock and probably wont get newegg stuff but the Google IPO kicked ass and I was always curious how its done..
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If you want pre-IPO shares, typically for small investors, each broker gets assigned a few shares that they can distribute to their clients.

Post-IPO, anyone can buy the stock just like any other stock.
 
a123456 said:
If you want pre-IPO shares, typically for small investors, each broker gets assigned a few shares that they can distribute to their clients.

Post-IPO, anyone can buy the stock just like any other stock.
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Basically, if you use scottrade.com or something similar, you can't buy on the primary market. You'll have to wait until it hits secondary.
 
This IPO could be like if Google and Amazon had a bastard child.

Reason behind my logic is that Newegg often is a better and quicker resource to find products and information about them than the manufacture's own websites. Heck if you search for a piece of hardware on google with the product's model number one of the top if not first results will be newegg's product page.
 
ok... so when i was 15 i wanted nvidia and didnt have cash, it would of been a 2000% investment...

also made the same mistake with amd, and other companies i always wish i invested in at their down times.

so what about this?
 
Remember even with the volume that newegg purchases its products at, it can't be making that much money. But I really hope newegg's prices and service does not drop. I remember buying parts for my first custom system:

Shuttle AK31
Athlon Tbird 1.33GHZ
256MB Crucial DDR PC2100 2.5 Cas
Thermalright SK-6!
 
So you have to be super special to get in on an IPO? if shares are limited they just dont hand them out to a n00b who has never bought stock before.. maybe?
 
I will be watching this closely. I have to say that I am interested in NewEgg as a stock, it might be a good quick turn around stock.
 
I was willing to pay Newegg prices, whether they were the best or not, for the great customer service and ability to buy anything and get it shipped to me no problem.

If that changes, and their resellerratings goes down, and all other indicators thusly occur, I'll take my business elsewhere.
 
a123456 said:
If you want pre-IPO shares, typically for small investors, each broker gets assigned a few shares that they can distribute to their clients.

Post-IPO, anyone can buy the stock just like any other stock.
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what? An IPO is done by investment banks for equity financing--to which is then sold OTC, or in the capital markets. Brokers aren't assigned any shares, all IPO shares right now are owned by several ibanks, which will then be resold. You can buy the shares as soon as the filing is passed.
 
TheMead said:
This IPO could be like if Google and Amazon had a bastard child.

Reason behind my logic is that Newegg often is a better and quicker resource to find products and information about them than the manufacture's own websites. Heck if you search for a piece of hardware on google with the product's model number one of the top if not first results will be newegg's product page.
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Prices of stock are solely dependent on profits and expected profits. Newegg runs the risk of being overvalued by amateur investors, whom will eat the capital losses the very next morning after the hype is gone.
 
kirbyrj said:
I doubt this will do much. The profit is too low for the volume.
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not really. Volume is the New Testament in retail these days. My worry is like a few others have mentioned, that their great customer service will be the first to show negative effects of this. Then again, it isn't like Newegg is looking to raise $500,000,000.00. You'd get massive investment from large capital firms (the same ones that own majority shares of mutual funds), and bean-counting would definitely become word of the day for them.

However, with the amount they are looking to raise, I think they just need a bit of capital to expand (which is their intention, see very bottom of this post if you didn't read most or all of the SEC filing).

Speaking of SEC filing...some interesting things in it:

In 2008, we initiated shipping with DHL in order to provide a lower cost shipping solution to our customers, predominantly on smaller form factor products. However, our average delivery time with DHL is longer than the average delivery time using UPS. As a result, we may face more customer dissatisfaction or suffer an erosion of our reputation as a merchant that can promptly fulfill orders due to the longer average delivery times for customers using DHL.
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I guess I'd rather have the slower DHL delivery times compared to the endless amounts of smashed packages or items made defective by the Universal Package Smashers corp.

Our technology and fulfillment infrastructure and processes may contain undetected errors or design flaws that may cause our websites to fail and materially impact our business and results of operation. In the past, we have experienced website interruptions and delays when implementing improvements to our principal website, resulting in lost net sales and customer dissatisfaction during the period required to restore access and to correct errors and design flaws. In the future, we may encounter the same and additional issues, such as scalability limitations, in current or future technology infrastructure releases. A delay in the implementation of any future version of our technology infrastructure and processes could substantially harm our business and results of operations.
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One has to wonder how much money per hour/minute they lose during such an outage. I can remember I think...twice the Newegg website not working, and now it is more like Amazon, run on a cloud and redundant beyond measure. Then again, just when you think something is unbreakable, it breaks.

To the extent we are not subject to certain tax obligations, we enjoy a competitive advantage to the extent our competitors are subject to those obligations. Several states have enacted, and a number of states and the U.S. Congress have been considering, various initiatives that could impose broad sales and use tax collection obligations on Internet retailers. Federal, state and local governments could accelerate efforts to pass Internet sales tax initiatives in response to pressure to make up budgetary shortfalls resulting from recessionary economic conditions and the failure to collect sales and use taxes on Internet purchases under current self-assessment regimes. Any of these initiatives would increase total costs to our customers, which could adversely affect our net sales.
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I've been wondering for about half a year when governments (whether local, state, or federal) would finally figure out that it is time to charge say a 'federal' tax on anything bought or sold on the internet through 'traditional' means (say amazon.com or newegg, but not things like craigslist or even Ebay). It could easily make up a lot of budget shortfalls considering the percentage of items now purchased on the internet these days (and that number is going steadily up).

...[T]his lack of management continuity could result in operational and administrative inefficiencies and added costs and may make recruiting for future management positions more difficult.
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high turnover rate of upper/senior management usually (but not necessarily always) indicative of some sort of internal issues that have yet to be addressed satisfactorily.

An important element of our business strategy is to expand into new product categories, services, technologies and regions, such as our international expansion into China and Canada, our expansion into new product categories beyond IT and CE and our plans to offer various e-commerce services for third parties. In directing our focus into new areas, we face numerous risks and challenges, including alienating our core customer base, facing new competitors and having the increased need to develop new strategic relationships. We cannot assure you that our strategy will result in increased net sales or net income.
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I rarely look at the non-computer/technology parts of newegg, however I do enjoy looking for television prices, home theater item prices, etc at the egg. It really irritated me when I started seeing rice cookers and shoes and such there, but then I decided as long as they didn't screw up the incredibly powerful search/organization functions of the main site, the part I use multiple times daily, I could care less if they offered bicycles or diapers for sale.

As for new competition...Amazon might sell more, and even Tiger Direct might sell more, but I would hazard a guess that neither has the fierce customer loyalty that Newegg has rightly built over the years. One or two of us might have a complaint to the point we refuse to shop there, but this forum, every forum I have ever been to that has mentioned Newegg has overwhelming considered the Egg to be among the gods of technology shopping sites. I've spent more money there over the last 7 years than I have in rent/bills/etc (luckily I make a bit back as the wife would kill me if I spent all that money on purely personal junk lol).

An increase in our China sales and operations will result in a larger portion of our net sales and expenditures being denominated in Chinese Renminbi, or RMB. The Chinese government controls the procedures by which RMB is converted into other currencies, and conversion of RMB generally requires government consent. As a result, RMB may not be freely convertible into other currencies at all times. If the Chinese government institutes changes in currency conversion procedures, or imposes restrictions on currency conversion, those actions may negatively impact our operations and could reduce our operating results.
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Recently, we have grown our business in China, focusing on IT products, CE products and household appliances, and we anticipate that our business in China will become an important driver of our future growth. In China, we generated net sales of $31.3 million in all of 2008 and $54.4 million in the first half of 2009.
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China is the world's largest economy in semi-awake state. Now...imagine a fully awake economy with 1.5billion potential consumers with disposable income. Even if only 1/5 of China's citizens had disposable income, that is still almost more than the entire population of the USA/Canada.

The profit margins might be low in the US/CDN, but they pale when compared to lack of extra freight costs of getting goods to North American shores, as well as majority of factories for all the companies that sell products on Newegg being in mainland China. Growth is there, it just might not be 'our' (ie USA) there.

We could also experience significant competitive pressure if any of our manufacturers and distributors were to initiate or expand their own retail operations. Because our manufacturers and distributors have access to merchandise at a lower cost than us, they could sell products at lower prices and maintain a higher gross margin on their product sales than we can, and the Internet provides them with the ability to directly and relatively inexpensively connect with customers.
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At some point I expect this to be the norm, without the need of such places as Newegg, Amazon, etc. That point might be far into the future, but then again, at the rate of technological (and therefore sociological) change, this could be accelerated significantly.

for those interested in investing, the little details are important (or having a broker/financial adviser who is into the little details):

New stockholders will incur substantial and immediate dilution as a result of this offering.

The price at which we are offering our Class A Common Stock is substantially higher than the book value per share of our outstanding Class A Common Stock. As a result, your Newegg shares will incur substantial and immediate dilution.
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and

We do not expect to pay any dividends on our Class A Common Stock for the foreseeable future.

We do not anticipate that we will pay any dividends to holders of our Class A Common Stock in the foreseeable future. Accordingly, investors must rely on sales of their Newegg shares as the only way to realize any gains on their investment. Investors seeking or expecting cash dividends should not purchase our Class A Common Stock.
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Now for me, I usually only purchase stock that has a strong history AND pays a regular dividend. This is why I have heavy investment into Intel, GE, (IBM if I could afford it haha), Altria, etc. and have very low tolerance for stocks like AMD. However, stocks should be looked at as a very LONG TERM INVESTMENT. Not Jim Cramer on CNBC shouting about nonsensical crap while throwing rubber bulls and punching buttons that make carnival noises (nor getting his ass eaten alive by Jon Stewart).


and finally, just in case anyone was interested in where their IPO money is supposed to be going...

We presently intend to use the net proceeds of this offering in the next twelve months as follows:


•

approximately $25.0 million to expand our international operations, including to build our Asian headquarters and a regional warehouse, fund operating expenses in China and improve logistics infrastructure of our Canadian operations;


•

approximately $8.6 million to repay: (i) a $7.5 million outstanding loan bearing interest at 6.3% per annum, due October 2010, and personally guaranteed by our Principal Stockholder, and (ii) a $1.1 million outstanding loan bearing interest at 6.048%, due October 2014; and


•

the balance for working capital and general corporate purposes, including IT and logistics infrastructure improvement, additional facilities and equipment, the creation of redundant IT infrastructure, efforts to increase market share through product and shipping promotional activities, branding campaigns and launching third party e-commerce fulfillment and marketing service platforms.
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As you can tell, I've been waiting for something like this for a very long time, and I already have a bit of investment experience. I'm not a broker, nor a day-trader, I inherited a pretty decent stock portfolio from a death in the family and I've had to learn how to manage it as I am just too uncomfortable with trusting some other dude to it, even if it is his job...I can learn as much as I need to to be able to manage it since I don't plan on high-volume trading. I plan to sit on it for up to another 10 years then sell enough of it to buy a decent house and bit of acreage in cash.

This might be a money-loser. But I think we can all agree that Newegg is pretty much the undisputed champ of nerd shopping. Remember when them dirty Canadians cried about how they couldn't get Newegg? And now they can. Now it's those dirty Europeans who are next in line, which is sad because their tears tasted oh so good hehe.
 
adventurous said:
I've been waiting for this for the past six or seven years...I'll definitely be a buyer (after seeing the financials of course).
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Are you serious :confused: or is that joke above my understanding...:(

Also there goes another company that I though was american based. Looks like I'll be buying more from tankguys and microcenter.
 
darkpaw said:
Pretty much what I expect to happen. Once companies go public they have to answer to their major shareholders. They'll start doing anything to cut the overhead and increase profit margin.
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Yes, its a shame that's usually how it goes.

 
tlc4tvm said:
Are you serious :confused: or is that joke above my understanding...:(

Also there goes another company that I though was american based. Looks like I'll be buying more from tankguys and microcenter.
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It's based in California and was started up by a Taiwanese immigrant...ie U.S. citizen.
 
CRAP! I sure hope their customer service doesn't go down and their prices don't skyrocket. We don't need another TigerDirect. Newegg kicks butt as is but I have a very bad feeling about this!
 
And THIS, my friends, is when Newegg starts going downhill.
 
Dynafrom said:
what? An IPO is done by investment banks for equity financing--to which is then sold OTC, or in the capital markets. Brokers aren't assigned any shares, all IPO shares right now are owned by several ibanks, which will then be resold. You can buy the shares as soon as the filing is passed.
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Yes, I understand how IPOs work, but I'm assuming the person I responded to was asking as a small-time investor trying to get in on pre-IPO prices.

The underwriters have a bunch of shares that they want to unload. Most of those shares that the underwriters are trying to unload will go to institutional investors, which is not interesting for the small-time investor. Some of the shares will go to retail investors, which is pretty much going to be the only way for a small investor to get any shares at pre-IPO price.

Getting shares post-IPO when the shares are on the open market is uninteresting since anyone can pay that typically higher price.
 
I hope this leads to them expanding int new markets, like Australia ffs. I visit newegg all the time just to get an idea on pricing even though i cant buy anything from it.
 
Dynafrom said:
Prices of stock are solely dependent on profits and expected profits. Newegg runs the risk of being overvalued by amateur investors, whom will eat the capital losses the very next morning after the hype is gone.
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No, the price of the stocks is solely dependent on how much someone will pay for the stock. An investor may think a company will tank, but if they think they can buy the stock and sell it at a higher price before it does tank, they will make the purchase. And when they make the purchase, it causes the price of the stock to rise (indirectly).

At the same time, a company can be insanely profitable, but if people don't think the stock is going to do well, they will try to sell the stock, causing the stock price to drop. This happens frequently when a profitable company announces lower than expected earning (even if the earnings are still wildly successful).

Stocks are, at best, an educated gamble.
 
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