Priceline.Com - Goes Public In 1999 And Further Expands Its Business Model

GOES PUBLIC IN AND FURTHER EXPANDS ITS BUSINESS MODEL (1999 )

Priceline.com 's initial public offering (IPO) on March 30, 1999, was one of the hottest Internet IPO's of the year. The company raised about $115 million from the initial sale of shares at $16 each. By April 18 the stock had reached nearly $60 a share. When the company announced on April 26 that more than 1 million customers had tried Priceline.com in its first year, the stock rose to $121 a share. Forbes noted that Jay Walker's initial $25 million investment in the company was now worth $4.3 billion.

During 1999 Priceline.com expanded its business model to include mortgages and automobiles. It created a new automobile unit and hired Maryann Keller, a veteran auto analyst, to be in charge. Her mission was to take the company's automobile business, which was available only in New York, nationwide. Later in the year AutoNation Inc., the world's largest car retailer, agreed to a three-month test in the Tampa, Florida area, whereby it would submit bids to try and sell cars to consumers who had named a price for a specific vehicle on Priceline.com.

Priceline.com first offered mortgages through an alliance with LendingTree Inc., which would forward mortgage requests to 22 lenders in its network. Priceline.com and LendingTree subsequently added home refinancing and home equity loans. Later in 1999 the company expanded its mortgage business by establishing a joint venture with Alliance Capital Partners of Jacksonville, Florida, called Pricelinemortgage. The companies claimed their online mortgage application process would save consumers up to $1,000 in closing costs.

Meanwhile, more major airlines were signing up and providing seats to Priceline.com, including Continental and Northwest. The company claimed that it had improved its matching rate on reasonable bids from 11.2 percent in 1998 to more than 42 percent in 1999. Priceline.com made money on each transaction by purchasing tickets from the airlines at prices lower than consumers were willing to pay for them. Those tickets were selected by Priceline.com from a private fare database to which the airlines had contributed a portion of their ticket inventory.

As a public company Priceline.com reported losses of $17.2 million in its first quarter of 1999 and $14.3 million in its second quarter. Second quarter revenue reached $111.6 million, nearly double the company's first quarter revenue. A secondary offering of stock and convertible debt raised some $500 million in new capital in 1999. As part of the offering Delta Airlines sold 1.5 million of its Priceline.com shares, which were worth about $145 million. Although the company did not expect to turn a profit anytime soon, its stock remained popular with investors. Its services were also a hit with consumers. A single-week sales record of 50,000 tickets prompted Priceline.com to announce that it had captured more than two percent of all leisure airline ticket sales in the United States. By the end of the year United Airlines, US Airways, and American Airlines had joined Delta, Continental, Northwest, TWA, and America West as participating airlines.