On Tuesday, online retailer Buy.com filed paperwork with the Securities and Exchange Commission for what could be its second IPO attempt.

Buy.com’s freshly filed IPO papers reveal that the company is still losing money, but has made significant progress since the bust. While the electronic retailer continued to post net losses for the past three years, it successfully reduced its operating expenses by roughly half, from $24.4 million in 2003 to $13.3 million in 2004, by drastically reducing its marketing, merchandising, and sales expenses.

The company’s first entry into the capital markets took place in February 2000. The firm raised $182 million, selling 14 million shares at an offer price of $13 per share, and even saw its share price touch a high of $35. However, after consistently failing to make a profit, founder Scott Blum was forced to take the company private in 2001, buying it back for $23.6 million, a mere 17 cents per share.

Even as expenses fell from 2003 to 2004, the company saw net revenues rise 22 percent from $238 million in 2003 to $290.8 million in 2004. As a result, the firm reduced its losses from $25.6 million in 2003 to $15.4 million in 2004. In the last quarter of 2004, the company had turned in positive EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization—a key gauge of a company’s financial health) of $224,000.

Timing may also be on the electronic retailer’s side. A total of 238 companies went public in 2004, raising $45.2 billion. Among these was the IPO for Buy.com rival Shopping.com, which saw its share price perform the best in the year on the first day of trading. “The IPO market has been quite buoyant,” said Richard Peterson, an IPO analyst with Thomson Financial.

Thomson Financial

The preliminary prospectus filed with the SEC does not detail the number of shares being issued or at what price. However, according to Tom Taulli, an analyst with IPO analyst firm CurrentOfferings.com, “If they sold at even one times revenues, the price range would be anywhere from $10 to $15.”

According to Mr. Taulli, companies like Buy.com “can sell at pretty hefty valuations, so this [IPO] could come at north of $1 billion.” He said that if the company were to issue its 128 million outstanding shares at $10 per share, the net market cap would come to $1.2 billion. “A company will typically issue 10 to 20 percent of their shares. So the IPO could be over $200 million depending on the valuation,” he said, though he conceded that the estimate was a “pure guess.”

Mr. Taulli compares Buy.com to rival Overstock.com, which went public in 2002 and now trades at a 348 percent premium to its offer price of $13 per share. At the time of its offering, Overstock.com was also still in the red; however, in the year prior to the offering, the company increased revenues by 57 percent over the year before and reduced quarterly operating losses by 94 percent over the preceding eight quarters.

Overstock.com

The prospectus does mention that the proceeds will be used “for repaying indebtedness and for working capital and other general corporate purposes, including enhancing [the company’s] infrastructure and expanding sales and marketing activities.”

As of December 31, 2004, the company’s outstanding balance on such debt was approximately $22.7 million, owed to ThinkTank Holdings, a company owned in whole by Mr. Blum. The prospectus also says the company may “use a portion of the net proceeds for acquisitions and investments in complementary businesses, technologies and strategic relationships.”

According to the prospectus, RBC Capital, Thomas Weisel Partners, and Pacific Crest Securities will underwrite the IPO. Due to SEC regulations on a “quiet period,” both the underwriters and the company declined to comment on the IPO.