Xoom, an online money transfer operator, has filed for an IPO.
Launched in early 2007, Xoom allows customers to send — through xoom.com, mobile devices and even Wal-Mart’s (NYSE:WMT) website — funds from the U.S. to 30 countries, including India, Mexico and the Philippines. The sender uses a bank account, credit card or debit card.
Xoom’s technology is fairly complex. Keep in mind that it must be highly secure, integrate with many financial services systems and be in compliance with laws for money laundering, anti-terrorism and drug-running.
Growth has been torrid for Xoom. From 2007 to 2011, revenue increased from $7.4 million to $50 million, which is a compound average growth rate of 61%. While the company sustained a loss of $4.4 million for the first nine months of 2012, that doesn’t seem unreasonable given Xoom’s focus on growth.
The traditional money-transfer industry, which has been dominated for years by Western Union (NYSE:WU) and MoneyGram (NYSE:MGI), is certainly vulnerable to disruption. These operators charge steep fees, have slow transaction processing and must operate an extensive physical infrastructure.
So, the market opportunity is massive. According to the World Bank’s Migration and Development Briefs, the remittance market came to $513 billion in 2011 and is expected to reach $685 billion by 2015.
Xoom plans to issue shares on the NASDAQ under the ticker “XOOM.” The lead underwriters include Barclays (NYSE:BCS) and Needham & Co.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.
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