Online money transfer company Xoom Corp. (XOOM) is seeing its shares surge higher on Friday, its first day of trading as a public entity. The San Francisco-based company priced its initial public offering on Thursday at $16 per share for each of the 6.3 million shares it was offering. The pricing came in $1 above the anticipated range of $13 to $16 per share. Investors are showing that they still have a thirst for consumer websites as share opened trading at $21 and have not looked back mid-way through the afternoon, rising to $23.25 and holding near those levels as of the time of this writing for 45 percent gains.
The IPO pricing put the total value of shares at $101 million and gave the company a market capitalization of just over $500 million.
Xoom’s platform allows customers in the United States to wire money to their choice of 30 other countries using only the Internet via computers, laptops, tablets, smartphones, etc. About 25 percent of all transactions are transferred through mobile phones. It’s offerings are basically the digitalization – with a twist – of Western Union (WU) or Moneygram International (MGI) stores that people have to go to in order to wire funds. The money is sent from the payers bank account, credit or debit card to the recipient’s cell phone (where it can be picked-up at participating locations), bank account, PayPal account or even available in certain countries for door-to-door delivery.
Xoom generates its revenue from transaction fees and contests that its fees are lower than others in the industry.
Sales have been increasing for Xoom, which was co-founded by early PayPal (EBAY) investor Kevin Hartz, in recent years. The firm has handled $6.6 billion in transactions in the past five years, with about $3 billion of it sent in 2012. The company generated $80 million in revenue during that year, a 60 percent climb from 2011, although it still has never been able to swing a profit.
In 2012, as well as in 2011, Xoom was named to the Wall Street Journal’s “Top 50 Venture Backed Companies,” a list that has been dubbed “the next big thing” list by some. Sequoia Capital LLC, New Enterprise Associates and Agilus Ventures are three of the larger venture capital funds behind Xoom, with 18%, 16% and 10% holdings, respectively.
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