Investing to Wealth

Filed under: Initial public offerings

Since getting its start in 1998, OpenTable has been a key part of the restaurant system. Essentially, the company has an online platform -- called the Electronic Reservation Book (ERB) -- that helps facilitate reservations. In fact, the system has seated about 2.8 million diners per month over the past year.

Well, now OpenTable has filed to go public.

No doubt, the company is targeting a huge market opportunity; that is, there are about 30,000 reservation-taking restaurants in the U.S., seating 600 million dinners. And, by using automated systems, there can be significant cost savings, which is certainly a big deal in the sluggish economy.

As for OpenTable, the system provides key benefits, such as: tracking of customers, which allows for personalized service; e-mail marketing; and table management. Such things can be critical for customer loyalty.

OpenTable's business model calls for a upfront install fee and a monthly subscription, as well as a reservation fee for each customer seated. All in all, it is working quite well. For first nine months of 2008, revenues came to $41.3 million, compared to $29.3 million for the same period in 2007. However, there was a net loss of $149,000.

So, while the current IPO market is horrible, things could open up in a few months when OpenTable is ready to hit the markets. Thus, the offering may have a decent performance.

The lead underwriter on the deal is Merrill Lynch & Co. Also, you can locate the prospectus at the SEC website.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a free online business valuation tool for small businesses.

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