Boston home furnishings online retailer Wayfair Inc. was set to start trading today at a higher than expected share price on the New York Stock Exchange — the 20th Massachusetts company to undergo an initial public offering this year.
Wayfair last night said it would offer 11 million shares at $29 a share — higher than the $25 to $28 range it had set in regulatory filings — in a deal that will raise $319 million.
As a high-growth company with no profits to show, Wayfair comes with pluses and minuses for investors. On the positive side, it has lots of room for growth. Its 6 percent market share makes it the leading company in the under-penetrated online home goods market, which accounts for just 7 percent of total home goods sales, said Kathleen Smith, principal of Renaissance Capital, an IPO exchange-traded fund manager.
And Wayfair has been growing fast, with a nearly 50 percent revenue increase in the first half of the year to $574.1 million, and 52.4 percent year-over-year growth to $915.8 million in 2013.
"And they're pricing at a fairly reasonable (price) relative to other similar companies," Smith said.
Wayfair is not making money, however. It lost $51.4 million in the first half of the year, after a 2013 loss of $15.5 million, primarily due to increased advertising spending. And those losses are expected to persist for a couple of years.
"This is the dark side," said Rett Wallace, co-founder of Triton Research, a financial data and intelligence firm. "It's not clear that they can ever be profitable."
But losses aside, Wayfair is a "valid business," according to Smith. "Investors are looking for these high-growth companies, figuring that they can figure out their model," she said. "Even Amazon doesn't earn money, and investors have been tolerating their negligible earnings."
Wayfair formerly operated through hundreds of niche websites before consolidating under Wayfair.com in late 2011 and changing its name from CSN Stores. The company holds little inventory, shipping to customers directly from its suppliers.
The company, which was in a quiet period yesterday, was unable to comment.
Wayfair's IPO is the 20th by a Massachusetts-based company this year and the largest since Samsonite International raised $1.3 billion in its June 2011 IPO on the Hong Kong stock exchange, according to Dealogic, a New York financial software company that tracks IPOs.
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