CarsDirect.com Files for IPO

At a time when most Internet companies are staying out of financial markets, online auto dealer CarsDirect.com, Inc. has filed with the U.S. Securities and Exchange Commission (SEC) to sell shares in an initial public offering.

CarsDirect, based in Los Angeles, plans to sell $175.2 million (US$) worth of stock at a price yet to be determined. Proceeds from the IPO will be used to fund operations, according to the SEC filing. The company said the money it raises, along with available cash, “will be sufficient to satisfy our working capital requirements for the next 12 months,” though it may also seek additional equity or debt financing.

The company was formed in 1998 and was one of the first companies to sell cars on the Internet. According to J.D. Power and Associates, 55 percent of Americans who buy cars this year will use the Web at some point in the process; the number is expected to rise to 80 percent by 2003.

Competition from AOL

CarsDirect faces stiff competition from the likes of America Online, Inc. (NYSE: AOL), which announced its second car-selling pact Wednesday in as many days. AOL is preparing for a fall launch of a new auto site.

To that end, the Internet giant has entered a four-year marketing alliance with Autoweb.com, Inc. (Nasdaq: AWEB), according to AOL’s announcement Wednesday.

Autoweb, an online information service for car buyers, will license its content, data and technology to AOL, which will make it easier for AOL subscribers to research and buy cars. Through AOL, AOL.com, CompuServe, Netscape Netcenter and AOL Digital City, consumers will be able to configure cars by manufacturer, model and other specifications, and compare prices of competing vehicles.

On Tuesday, AOL announced a plan to create, along with AutoNation, Inc. (NYSE: AN), what the companies are calling the world’s largest virtual auto dealership. Both agreements are aimed at capturing a chunk of the market.

IPO Pace May Pick Up

CarsDirect takes orders from customers, buying vehicles built to buyer specifications from dealers. The company makes a profit from the sale, and also gets revenue from licensing vehicle configuration data to automakers, as well as from the sale of warranty contracts and from arranging financing. CarsDirect has a financing arm, CD1Financial.

CarsDirect did not say when it might sell its shares. Though the pace of IPOs — especially those of Internet companies — has slowed to a trickle in recent weeks, some new issues have done well, and the market may be set for a comeback. Newly public Internet software maker Sequoia Software Corp. (Nasdaq: SQSW) is trading above its IPO price. However, the deal was priced at the low end of an already-lowered range.