SAN FRANCISCO - Online payment provider PayPal Inc. on Wednesday delayed an initial public offering of stock that will test investors' tolerance for rapidly growing Internet companies saddled with heavy losses. <br>
<br>
The Palo Alto-based company hoped to sell 5.4 million shares for $12 to $14 per share Wednesday evening and launch trading on the Nasdaq Stock Market on Thursday, but a patent infringement lawsuit filed by CertCo Inc. prompted investment bankers to delay the offering for at least 24 hours. <br>
<br>
The IPO pricing now is expected to occur Thursday evening, enabling PayPal to make its Nasdaq debut Friday. <br>
<br>
A handful of other Internet-oriented companies have launched IPOs since Wall Street lost its appetite for dot-coms in mid-2000, but none has been as popular with consumers as PayPal. <br>
<br>
The company acts as a financial middleman on the Internet by collecting payments from the credit cards and bank accounts of online buyers and then delivering the money to the sellers through e-mail. <br>
<br>
As of Dec. 31, PayPal had 12.8 million accountholders worldwide, more than doubling its customer base of 5.5 million in the prior year. <br>
<br>
The rapid growth hasn't translated into profits yet. Since its March 1999 inception, PayPal had accumulated $283 million in losses through Dec. 31, according to company documents filed with the Securities and Exchange Commission. <br>
<br>
The PayPal IPO heralds a throwback to 1999 and early 2000 when investors thought unprofitable Internet companies were poised to change the world and mature into moneymaking machines. <br>
<br>
``Everyone still remembers that dream,'' said Kyle Huske, an analyst with IPO.com. ``This is one of those IPOs where you could make a killing, because PayPal could become the preferred method of payment on the Internet.'' <br>
<br>
Although PayPal hasn't made money yet, the company is reducing its losses as its revenue soars. In 2001, the company reported a net loss of $107.8 million on revenue of $104.8 million. In the prior year, PayPal lost $169.5 million on revenue of $14.5 million. <br>
<br>
In the final quarter of last year, PayPal lost $18.5 million on revenue of $40.4 million, an improvement over a loss of $41.9 million on revenue of $8.8 million at the comparable time in the prior year. If not for accounting charges absorbed to pay for past acquisitions and stock-based compensation, the company says it would have earned $3.2 million in its most recent quarter. <br>
<br>
PayPal generates most of its revenue from transaction fees paid by its users. Those fees averaged 3.2 percent of the transaction amount in the fourth quarter, up from 2.1 percent in the prior year. <br>
<br>
The progress has convinced some observers that PayPal is on the verge of becoming a financial services powerhouse. <br>
<br>
``This is the 800-pound gorilla in this space,'' said David Menlow, president of IPOFinancial.com. ``This company is a piece of marketing genius.'' <br>
<br>
PayPal faces increasing competition from other online payment services operated by Internet auctioneer EBay, Citibank, Yahoo! and Western Union. <br>
<br>
EBay's payment service, launched in a joint venture with Wells Fargo nearly two years ago, looms as PayPal's biggest immediate threat. Online auctions account for nearly two-thirds of PayPal's transaction fees, and most of the volume occurs on EBay. The auction site theoretically could restrict its buyers' ability to use PayPal, although EBay says it has no plans to do that. <br>
<br>
PayPal also faces possible regulatory hurdles. Regulators in California, New York, Idaho and Louisiana have warned PayPal that its service might constitute an unauthorized banking business, according to PayPal's SEC filings. <br>
<br>
The company also has had an occasionally rocky relationship with the credit card systems - Visa and Mastercard - that help it make online payments. Just last month, Visa fined PayPal $30,000 for the way the company charged certain fees, the company said.
