SAN FRANCISCO -- Online payments company Xoom will receive a large payment of its own in its initial public offering, deciding Thursday to push its price higher and bring in $100 million.
Xoom, a startup that helps people transfer money internationally via the Internet, priced its initial public offering at $16 a share, higher than the most recent range of $13 to $15 a share. The San Francisco company, cofounded in 2001 by Kevin Hartz, one of the earliest investors in PayPal, will take in more than $100 million and receive an initial valuation of about $500 million.
Although anybody can use Xoom, pronounced "zoom," to directly transfer money to friends and family, the company has targeted the immigrant market. Rather than walking into Western Union to wire money home, immigrants can log onto Xoom.com and send money to 30 countries on six continents.
Cash is wired to the recipient's cellphone from a bank account, credit card or PayPal account; the recipient can withdraw that cash at participating stores or banks or even have it delivered home.
"It's a clever model, and they've clearly found a good niche," said Bill Barhydt, CEO of a similar company in Palo Alto called Boom Financial. He called the traditional cash-remittance system expensive and inconvenient.
Xoom says the fees it charges customers to transmit money are less than those of entrenched players like Western Union. The startup booked $80 million in revenues last year but is not yet profitable.
The company is selling 4.6 million shares in the IPO, with other stockholders offering an additional 1 million. The stock is expected to begin trading on the Nasdaq exchange under the symbol "XOOM" on Friday morning.
When Hartz and his wife in 2006 turned their attention to their other hot Silicon Valley startup -- Eventbrite, which lets users plan, promote and sell tickets for events -- Hartz handed the reins at Xoom to board member John Kunze, previously CEO of Plumtree Software. The board also includes Keith Rabois and Roelof Botha, both influential alumni of the online-payments pioneer PayPal like Hartz, giving three members of the so-called PayPal Mafia another large payout.
Xoom says that in the past five years, customers have used the platform to send $6.6 billion. Nearly half of that was transmitted last year.
"Xoom has loyal customers that love the company's product," said Sam Hamadeh, CEO of a New York firm called PrivCo that analyzes the finances of private companies.
He said the company's high percentage of repeat customers, plus 60 percent revenue growth between 2011 and 2012, "reassures IPO investors that Xoom will have solid quarterly earnings visibility once it's a public company."
Still, Xoom's IPO filing warns that the challenges the company faces are the thicket of international regulations that govern money transfers and the risk that criminals or terrorists might use the service, scaring off legitimate customers.
Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.