Xoom Corp (XOOM) Shares Surge In Trading DebutVW Staff
On Friday, investors gave a thumbs up to international money transfers by supporting Xoom Corp (NASDAQ:XOOM)'s IPO.
The company, which enables customers wire cash across borders via the Web, jumped 35% on the Nasdaq. The stock opened at $21, representing a 31% increase from its $16 offer price.
As the trading day is getting to its end, the stock is currently trading at $23.05, a 44% increase.
The San Francisco company allows U.S. based people to utilize computers and smartphones to send money to 30 countries, reported MarketWatch. It generates revenue mainly from transaction fees.
John Kunze, Xoom's chief executive said via The Wall Street Journal, “We are a disruptor. We've seen this play out before: An offline customer experience that is highly challenged, and [then] that experience is disrupted by digital properties with a better price proposition.”
Kunze noted that during the company's “road show” marketing efforts, it met demand from investors in small-capitalization stocks who are interested in technology and financial sectors. The company's technology platform enables the quick delivery of transfers to banks, getting rid of the need to get the money delivered at agent locations.
So who are Xoom's competitors? They include The Western Union Company (NYSE:WU) and Moneygram International Inc (NYSE:MGI) for the “remittance” market such as money transfers from immigrants sent back home to their friends and family. Last year, this market expanded to developing countries including India, Mexico and Nigeria; it has an estimated $406 billion reach, according to the World Bank.
Xoom is just a small portion of the market at 2% to 4%, but investors and Xoom's venture-capital backers are putting their money on customers who used to go to locations and wait in line for tranfers to now do this online. This should cause Xoom's market share to increase.
As for its IPO, on Thursday Xoom Corp (NASDAQ:XOOM) priced 6.3 million shares higher than its initial $13-to-$15 range as filed in Securities and Exchange Commission documents for its 5.2 million sold in the offering. Existing stockholders sold an additional 1.1 million shares, which gave the deal an approximate $100 million value.
It's a little risky as the company has never seen a profit, but in the 2012 calendar year, it reported $80 million in revenue, a 60% rise from the previous year. Its growth potential has won investors and the company has raised the amount of funds it sends at its annual 88% rate per year since 2007.
Its prospectus also disclosed that in 2012, Xoom Corp (NASDAQ:XOOM) grew its active customer base by 50%, reported MarketWatch.
About 75 percent of Xoom's business comes from U.S. transfers to the Philippines, India and Mexico with almost 25 percent taking place via mobile devices.
Backers for Xoom includes the venture-capital firms such as Sequoia Capital LLC, which will keep its approximate 18% share after the offering, while New Enterprise Associates and Agilus Ventures will keep 16% and 10% shares, respectively.
Xoom Corp (NASDAQ:XOOM) has said it will use the IPO's proceeds for general corporate purposes and for purchasing complementary businesses, technologies or other assets.
The company's lead underwriters were Barclays PLC (LON:BARC) (NYSE:BCS) and Needham & Co. LLC.