In a rousing vote for automotive commerce on the Internet, Wall Street last week raised $173.5 million for two online auto Web companies.
Shares of Autoweb.com Inc. sold for $70 million when they were offered to the public last Tuesday, March 23.
Shares of Autobytel.com Inc., buoyed by its rival's strong showing, sold for $103.5 million last Friday, March 26.
Now the companies must boost both their Internet visibility and operating revenues. Both companies were millions of dollars in debt before the stock offering, and some analysts are not optimistic about their prospects.
Autoweb.com wants to be more than a sales lead service for car dealers, said Michele Hickford, director of marketing for Autoweb.com.
Programs on the site will include chat rooms where owners can meet and talk about their vehicles, Hickford said. Autoweb.com also plans to offer expanded access to insurance, financing, roadside rescue and vehicle reviews.
In a prospectus filed with the Securities and Exchange Commission, Autobytel.com said it will offer some of the same services, such as insurance and financing information. The company declined to comment on its plans.
Autoweb.com (Nasdaq: AWEB), headquartered in Santa Clara, Calif., sold 5 million shares in its offering, or 21 percent of its 23.5 million outstanding shares. After fees and commissions, the company put $63.8 million in its coffers. Two founding shareholders received $1.3 million. They sold 100,000 shares and retain a combined 7.3 million shares, or 31 percent of the company. The offering valued Autoweb.com at about $320 million.
Autoweb.com closed Friday, March 26, at $32.75 per share on volume of 2.7 million shares. The stock opened at $14.00 and hit a high of $40.00 earlier in the week.
Autobytel.com (Nasdaq: ABTL), located in Irvine, Calif., sold 4.5 mil-lion shares, or 25 percent of its 17.8 million outstanding shares. The offering valued the company at about $415 million. After fees and commissions, the company put $69.5 million into its coffers. Two founding shareholders sold 1 million shares and pocketed $21.3 million. They retain 6.45 million shares, or 36 percent of the company. On Friday, Autobytel.com closed at $40.25 per share after hitting a high of $58.00 per share. The stock opened at $23.00 per share and traded 8.9 million shares.
The companies' initial success on Wall Street has more to do with the '.com' in their names than with the service they provide, said Chris Denove, director of consulting operations with J.D. Power and Associates in Agoura Hills, Calif.
'There is not any overall significance in the fact that Autoweb.com went public,' he said. 'Automotive e-commerce is still in its infancy, and there is still work to do before the site is interesting enough' to be a so-called destination site on the Web, he said.
At least $14 million of the money Autoweb.com raised in the stock offering will go to advertising, according to a prospectus filed with the SEC.
A substantial chunk of the money will go to hiring staff, investing in information technology and in dealership training programs, Hickford said. Autoweb.com now has around 100 employees, she said.
The Internet companies' challenge is to persuade consumers to turn to their computers first when they want a new vehicle or service, said Jim Hall, an analyst for AutoPacific in Southfield, Mich.
Internet companies are basically information providers, and car buying is a physical, even a visceral, experience, he said. Chat rooms and floods of e-mail might not be the best way to establish a company's identity, Hall said.
'I think people who use chat rooms are basically sociopaths. And I, for one, don't want to go online and talk with a bunch of sociopaths,' he said.
At least two things differentiate independent sites, such as Autoweb.com, from manufacturer-sponsored sites, such as GM's gmbuypower.com, Denove said. Autoweb.com enjoys a perceived independence from manufacturers, while GM BuyPower has vast amounts of information about GM inventory. The sites will tout these strengths as they fight for customers.
But Autoweb.com's perceived independence could be threatened if it aligns itself with too many services, he said.