The founder and CEO of the world’s number two online-only electronics retailer has the investment world baffled over its long-overdue IPO. Newegg had filed the paperwork for a $175 million IPO back in September 2009 but has not followed up with any more word since.
The only recent indication that the $3 bil.-a-year etailer may be moving toward an IPO announcement is the incredible limited-time bargains it began offering recently. Those include noise-canceling Panasonic headphones for $49.99 and rock-bottom prices on chipsets for the hard-core techies who have been the backbone of Newegg’s customer base.
Just last August Newegg founder and chairman Fred Chang fired President and CEO Tally Liu in late 2008 and took back the CEO job for himself. The investment community had seen Liu’s appointment as a step toward ensuring a smooth and successful IPO. Liu had been Vice President of Internal Audit at Knight Ridder which had been acquired by The McClatchy Company. Liu had established his finance credentials over three decades with various positions at Knight Ridder and its subsidiaries.
Fred Chang immigrated from Taiwan where he majored in applied math at the Chinese Culture University. Prior to co-founding Newegg Chang founded ABS Computer Technologies, another online retailer from which he evolved Newegg.
Investors had been licking their chops over the prospects of a Newegg IPO. Its September 2009 SEC filing showed that it had been profitable every year since its founding in 2009. For 2008 it reported sales of $2.1 billion and 2,000 employees. Its profit margin was thin, but its reputation as the go-to etailer for gearheads gave it the kind of potential that investors like.
In the absence of any company announcements speculations about the IPO delay and Liu’s firing centered around several pieces of bad publicity that broke in 2010. In February three former employees sued Newegg for labor violations which the company denied. In March Newegg sold 300 counterfeit Intel Core CPUs. When it discovered that they were counterfeit and not “demo units” as it had initially stated, it terminated its relationship with the responsible supplier and offered refunds or replacments to the affected customers.
Perhaps the most damaging piece of bad news broke in August of 2010 when a Texas federal court ruled that Newegg’s shopping cart software and other related e-commerce applications infringed a Soverain Software patent and ordered it to pay $2.5 million in damages. The suit had also included as defendants other online retailers like Zappos.
And of course the Great Recession’s impact on the electronics and PC business had also been factored into the decision to delay the IPO. Now that the industry seems to have roared back, Newegg appears bent on building excitement around its brand with a spate of limited-time bargains that have gearheads abuzz. Late spring may be a good time for an announcement of an IPO target date.
