Founded in 2000, venture-backed Zipcar is the largest membership-based car sharing network in the world, with operations in the US, Canada and the UK. Its members have access to a network of 8,000 conveniently-located vehicles available for hourly or daily rentals, providing city dwellers and students with a turnkey solution for running errands or short trips. Zipcar has increased membership and revenues more than 10x since 2005 and, as the first mover in the emerging car sharing space, the company targets a projected global market opportunity north of $10 billion. Zipcar plans to raise $125 million by offering 8.3 million shares at a range of $14-$16. Existing shareholders are selling 1.7 million shares, representing 20% of expected deal proceeds. Goldman, Sachs & Co. and J.P. Morgan are the lead underwriters on the deal, which is on the IPO calendar for the week of April 11.
Zipcar has an impressive track record of top line growth and targets a large-and growing market opportunity in the car sharing space. The company has posted two consecutive years of positive cash flow, and while it is investing aggressively in growth, its returns should scale nicely as increased membership drives higher vehicle utilization. Admittedly, its rapid expansion carries execution risk and high capital costs, and traditional car rental companies could eventually emerge as a significant competitive threat. Nonetheless, we believe Zipcar's first-mover advantage and compelling vehicle-level economics should support a valuation...
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