Newegg.com to Sell Shares to Fund International Expansion
Online retailer Newegg is seeking to raise up to $175 million in an initial public offering partly to finance expansion in China and Canada, the company said in SEC documents. Newegg said it will spend $25 million over the next 12 months to increase its operations in the countries. Fred Chang, who owns 77 percent of the company, was named president of the China business. The company’s revenue from China increased to $54.4 million in the first half of 2009 from $12.7 million a year earlier, Newegg said. IPO proceeds also will be used to repay a $7.5 million bank loan due in October 2010 and guaranteed by Chang.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Newegg, which expects to open an Asian headquarters in China in Q1 2010, has 1,096 employees there, including 388 working on its e-commerce site, the company said. It bought land rights in Jiading, near Shanghai, for $3.2 million and expects to spend $10 million on the new office and related buildings, the company said. The Chinese Web site carries 12,600 PC- and CE-related products and processed 3,600 orders a day the three months through June, the company said. In Canada, Newegg will open a 55,000-square-foot office in October in Mississauga, it said. The new locations in Canada and China will double as fulfillment centers, supplementing ones in California and New Jersey, Newegg said. Newegg carries about 33,000 SKUs on its U.S. Web site, it said.
Newegg, which had 12 million registered users June 30, launched in 2001 as a retailer of PC-related products. But it has broadened its assortment of CE devices, sales of which rose to $117.8 million in first half 2009 from $96.1 million a year ago. Newegg sells AV products and videogame consoles. The bulk of its business remains PC devices, including 1,582 SKUs of desktop and notebook PCs and 1,732 memory products, the company said. Newegg made 11.9 percent of its product purchases from Ingram Micro in 2008, it said.
The company’s net income improved $15.7 million in the first half of 2009 from $13 million a year earlier as revenue rose to $1.1 billion from $1.02 billion. Newegg’s North American sales increased to $1.05 billion from $1.02 billion. In 2008, Newegg’s net income grew $28.8 million from $18.6 million as sales increased to $2.1 billion from $1.8 billion the previous year. The $2.1 billion was short of the $2.3 billion that would have triggered a full payment of target bonuses to executives, the company said.
Newegg revamped management. Tally Liu was named CEO in August 2008, replacing Chang, who has since shifted to vice chairman and president of Newegg China. Liu, who joined the company as president in February 2008, was paid a $500,000 annual salary that doubled in April 2009, the company said. He also received 3.55 million in Class A equity incentive options priced at $7.45. Liu was paid a $535,823 salary in 2008 and got stock awards and options valued at $553,338 and $2.1 million. Liu’s target bonus was increased to 150 percent of his base salary from 100 percent, the company said.
Michael Amkreutz, vice president of product management and a former Toshiba executive, received a $243,308 salary in 2008 and stock awards and options worth $9,463 and $120,145. On Sunday, 1,506 Newegg employees were granted 1.75 million Class A stock options at $8.27, the company said.
Chang is Newegg’s largest stockholder, with 40.5 million Class B shares, followed by InSight Venture Partners, 6.6 million shares (12.7 percent), Newegg said. Liu owns 981,294 Class A shares (36.4 percent), and Amkreutz has 17,604 (1 percent), it said. Amkreutz also had 60,000 unexercised options that expire in 2018, the company said.
Newegg customer orders arrive in an average of 2.4 days, with UPS accounting for nearly 90 percent of deliveries. It added DHL in July 2008, the company said. It had 2,062 employees June 30, including 938 in the U.S. and 1,124 in Asia, the company said. - Mark Seavy