The much anticipated and (recently) much angst-ridden IPO for online payments
firm PayPal Inc. is now expected to be priced on Valentine's Day -- Thursday
-- for trading on Feb. 15, but the question is, will it be a sweetheart of an
offering?
New disclosures in a filing with the Securities and Exchange Commission (SEC) are
adding to the company's pre-IPO woes.
PayPal was forced to delay the initial public offering last week after being
hit with a
patent infringement lawsuit from New York-based CertCo. Since then, it
has filed updated SEC documents denying its technology infringed on CertCo's
patent.
Now comes word that banking regulators in Louisiana are ordering the service
to stop brokering payments between online buyers and sellers in that state
until the company receives a money transmission license there. PayPal said it
would comply when it receives the notice, but likely will appeal.
The Louisiana action was disclosed in a PayPal SEC filing Monday, in which
the company said that regulators in 10 other states and the District of
Columbia have indicated the company needs a license to run its online payment
service. Those states are: Arizona, California, Colorado, Idaho,
Massachusetts, Maryland, New York, Texas, Virginia and Vermont. The company
said it has already filed, or plans to file, applications in those states and
the District of Columbia, as well as Connecticut, Minnesota and North
Carolina.
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PayPal said in its filing that "if we are found to be engaged in an
unauthorized banking business, we might be subject to monetary penalties and
adverse publicity and might be required to cease doing business with
residents of those states. ... we could be subject to fines and penalties of
up to $5,000 per day in New York and $1,000 per day in Louisiana for the
period prior to our implementation" of steps to resolve the matter.
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The proposed offering had drawn much attention as the first Internet related
IPO since March 2001.
PayPal, which enables any business or consumer with an e-mail address to send
and receive secure online payments, had been planning to offer 5.4 million
shares of stock at $12 to $14 each. Its symbol will be PYPL.
Palo Alto, Calif.-based PayPal announced its IPO plans in December of 2001,
and the market launch was expected to be a predictor for what might befall
other Internet companies that have been deferring their plans to go public.
The company's legal headaches
(there's another lawsuit floating around) and a jittery public market
could reduce the deal's price, Wall Street experts say.
PayPal has also warned that, whether or not CertCo proves its case, the
litigation could prove costly.
"...Even if we prevail, the litigation could be time-consuming and expensive
to defend and could affect our business materially and adversely," according
to the company's filing with the SEC.
CertCo, an online risk-management company, filed the suit just days before
PayPal's IPO was scheduled to be priced, claiming PayPal has violated its
patent covering electronic payments. The complaint seeks unspecified damages
and an injunction against PayPal using the payment system, which is also in
use as part of PayPal's payment deal with online auction company eBay.
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