Increased IPO Price Could Net Zillow up to $60MM

Zillow increased the expected price for common stock in its initial public offering to $16-$18, up from last week’s estimate of $12-$14, according to a new filing with the Securities and Exchange Commission.

However, Zillow has never posted an annual net profit, losing more than $20 million in both 2007 and 2008. The company's net loss of $6.77 million in 2010 was 47% lower than its net loss of $12.85 million in 2009 and its 1Q11 net loss of $826,000 was down about 70% from its 1Q10 net loss of $2.8 million.

The real estate listing and mortgage rate search website firm will sell just under 3.5 million shares of Class A common stock. Concurrent to the IPO, Seattle-based Zillow will privately place approximately $5.5 million of its stock with existing investors, at a price per share equal to the initial public offering price.

At the midpoint price of $17 per share, Zillow will raise $56.8 million after underwriting discounts, fees and other IPO-related costs—up from the $51.75 million it originally proposed raising when it first filed its intentions to go public with the SEC on April 18. An increase or decrease of $1 per share would change the net proceeds by $3.2 million.

On Wednesday, Zillow registered its Class A stock ahead of its intended listing on the NASDAQ exchange under the symbol “Z.” Citigroup is the IPO’s underwriter, with four co-managers: Allen & Co., Pacific Crest Securities, ThinkEquity, and First Washington Corp.

After the IPO and private placement, Zillow expects to have 17.43 million outstanding shares of Class A common stock, which could increase to 17.95 million shares if the underwriters exercise an over-allotment of 519,300 shares.

Company founders Richard Barton and Lloyd Frink will continue to control all of the approximately 9.5 million shares of Zillow’s Class B common stock, which has a voting power of 10 per share, compared to Class A’s one-to-one voting power. Barton and Frink will control 46.8% and 37.8%, respectively, of the total voting power for both classes of stockholders.

The company generates revenue from advertising of real estate sale and rental listings and mortgage rates. Revenue has increased from nearly $4.3 million in 2006 (its first year of operation) to $30.5 million in 2010, including a 74% year-over-year increase from 2009 to 2010. Revenue for the first quarter of 2011 was $11.26 million, up from $5.33 million in 1Q10.

April’s IPO registration brought to light five resolved or ongoing legal claims against Zillow since Oct. 2009—all patent infringement claims.