Zipcar files for $75 million public offering

NEW YORK — Zipcar, the car-sharing company that rents vehicles by the hour, says it will seek to raise as much as $75 million in an initial public offering.

Zipcar, which has yet to post a profit since it was founded in 2000, will use the proceeds from the share sale to reduce debt and expand the Cambridge, Mass.-based company's fleet, according to a filing with the Securities and Exchange Commission.

Funds may also be used for acquisitions, it said.

The Zipcar filing comes after at least 20 companies worldwide postponed or withdrew IPOs in May as the European debt crisis sent the MSCI World Index of developed-market stocks down 9.9 percent.

Tesla Motors is also seeking to raise $100 million, while General Motors has said that it may sell shares to the public this year after its 2009 bankruptcy.

"The key for this company is to convince investors it can get to profitability in the not-too-distant future," said Paul Bard, director of research at Renaissance Capital, which has followed IPOs since 1991. "Investors love growth, but they really want to see a business model that is capable of delivering strong profitability over time."

Zipcar, which rents its fleet of 7,000 cars in cities and at universities in the U.S, Canada and Britain, posted revenue of $33 million in the first quarter, a 29 percent increase from a year earlier, the SEC filing showed. The company's net loss widened to $5.3 million from almost $3 million, it said.

The company has lost money every year since it was founded in 2000. In its regulatory filing, Zipcar cautioned that it might never become profitable and that it expects to incur significant future expenses as it continues to expand its business in urban markets in the U.S. and Britain.

Zipcar's announcement comes nearly a year after speculation arose that it was planning to go public.

It is also facing competition from rivals such as Hertz, which has started a similar service called Connect by Hertz. Enterprise and U-Haul have also started car-sharing services.

In November 2007, Zipcar acquired Seattle-based Flexcar, its rival in pioneering the car-sharing business in the U.S.

Zipcar operates in 13 metropolitan areas, including London, where it acquired Streetcar in April. Zipcar has also invested in Catalunya Carsharing, the biggest operator in Spain, and plans to expand in Europe.

Its 400,000 members, many of them college students, pay an hourly or daily rate along with annual dues and have access to cars strategically located in areas of high density.

Zipcar may have opportunities outside urban areas, including customers who want to rent minivans or pickups for the day, according to Jim Hall, principal of 2953 Analytics, an auto-industry consulting firm. Investing in those markets may curb profits at first, he said.

"They will have to learn vehicle-usage cycles for different markets all over the country and all over the world," Hall said. "They may have to overstock their car fleet in the early days while they are figuring that out."