Commerx Inc., the Chicago owner of the PlasticsNet.Com electronic-commerce site, is planning an initial public offering on Nasdaq later this year. The firm said Jan. 26 it has filed with the Securities and Exchange Commission to be listed under the symbol CMRX.
In the filing, Commerx reports its sales for the nine months ended Sept. 30 were $833,000. Its total sales for 1998 were $375,000.
But like many other fledgling Internet-related firms, Commerx has been operating at a loss. From its launch in July 1995 through Sept. 30, the firm lost $12.4 million, including more than $8 million in the first nine months of 1999.
That situation has done nothing to deter Web-hungry investors. Commerx recently completed a $38.6 million round of financing from 14 firms, including such well-known plastics entities as Huntsman Corp., H. Muehlstein & Co. Inc. and Eastman Chemical Co.
Commerx plans to use funds raised by the IPO "to continue to look at other business opportunities and to enhance our industry's progress," according to Chief Financial Officer David Dill.
Dill said Jan. 27 that Commerx stock could be listed as early as March, following an SEC review and a two- to three-week road show when Commerx officials will meet with potential investors in the United States and Europe.
"The key for us is to be able to go first to the plastics industry, and then to other industries, and show that we can improve value to the buyer and the seller," he said. "Currently in the plastics industry, businesses have to sort out thousands of suppliers, so there's a huge opportunity for us to bring efficiencies.
"Plastics is a huge industry," Dill added. "Investors can look at it and say, `You don't really need a big piece of it to have a good business.' Other business-to-business companies have gone public with a lot less."
As an example, Dill cited Chemdex, a business-to-business e-commerce provider for the life sciences industry. Chemdex, based in Mountain View, Calif., went public in July at around $25 per share and closed at $105 per share Jan. 27. Its per-share price had been as high as $143 in December.
The U.S. life science market is valued at around $9 billion, while the U.S. plastics processor-to-OEM market is estimated at $190 billion, according to Commerx.
Commerx's preferred stock sold for $12.43 a share in a November offering to a select group of investors. However, Dill said that price was agreed upon by that group and will have no bearing on what the opening price of Commerx's common stock will be.
The IPO prospectus revealed that three firms accounted for more than half of Commerx's 1999 revenues: injection molder Endura Plastics Inc. of Kirtland, Ohio (23 percent); resin broker National Plastics Network of Sturbridge, Mass. (20 percent); and injection molder Borneo Inc. of Murfreesboro, N.C. (14 percent). The prospectus noted that the percentage of revenue generated by each of these buyers is expected to decline this year.
The prospectus also indicated that although Ashland Chemical Co.'s General Polymers unit is Commerx's primary resin distribution supplier, the site is free to sell resin obtained from Muehlstein's Channel Polymers unit. Ashland also has invested in Commerx.
GE Plastics' Polymerland resin distribution and online sales business was identified as "a substantial competitor of the PlasticsNet marketplace" in the SEC filing. Polymerland and General Polymers are North America's two largest resin distributors.
PlasticsNet.Com currently offers about 30,000 plastics-related products from about 50 suppliers, including General Polymers and machinery maker Van Dorn Demag Corp.
PlasticsNet.Com was recognized as "one of the best-known e-market makers" in a Jan. 26 e-commerce forecast from Gartner Group, a research and consulting firm based in San Jose, Calif.
The forecast also predicts that e-market makers will handle $2.71 trillion in e-commerce sales by 2004, representing 37 percent of the overall business-to-business market.
"Valuation envy has already sped up e-commerce adoption in the chemicals and electronic components industry, where traditional brick and mortars are under pressure to keep up with fast-moving virtual competitors," Gartner Group analyst Leah Knight said in the forecast.