Amazon.com High on IPO. So Is Its Valuation.

Online bookseller Amazon.com's push to sell some 3 million shares for as much as US$13 per share would value the company at $300 million - a pretty penny for a firm that lost about $6 million last year. And Amazon.com's prospectus suggests those losses could grow larger.

Bill Bass, an analyst at Forrester Research, attributed the high valuation to "Internet inhalant" - the extra high that Net-related stock offerings can carry with investors. "Some people smoke Internet inhalant and their judgment gets bizarre," Bass said.

Whatever else, Seattle-based Amazon.com approaches its initial public offering with the heady glow of having carved out a niche as the Web's leading bookstore. The company offers more than 2.5 million titles, as well as CDs, videotapes, and audiotapes. Sales last year reached approximately $16 million, compared with just over $511,000 a year earlier. The company pioneered low-overhead book sales on the Web - by keeping inventory at a minimum and avoiding costly retail outlets, Amazon.com is able to sell large quantities of books at a substantial discount to cover price.

The trouble is, Amazon.com is filing just when some dark clouds are gathering on the horizon. The company's prospectus contained a stock phrase among Internet start-ups about sustaining operating losses for the forseeable future, but follows with another, more unsettling caveat: "The rate at which such losses will be incurred will increase significantly from current levels, and its recent revenue growth rates are not sustainable and will decrease in the future."

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