The company behind the Lulu.com book publishing Web site has taken the first official step toward an initial public offering in Canada.
The Raleigh-based company -- founded in 2002 by CEO Bob Young, who previously co-founded Linux software giant Red Hat -- disclosed in its preliminary prospectus that it turned profitable in the latest quarter.
It enjoyed a 39 percent jump in revenue in 2008 but last year its revenue rose a modest 4 percent to $31.6 million. The company attributes the flattening revenue to the sour economy and lower spending on sales and marketing designed to boost profitability.
The company, which filed with Canadian authorities on Friday, helps authors self-publish books. It collects fees for the books it publishes and also sells services to authors. In additiion, its weRead.com helps readers find new books and authors.
Listing its stock in Canada should enable Lulu to pay lower costs than it would if its IPO called for it to be listed on a U.S. stock exchange. The Canadian process also involves less-rigorous regulatory scrutiny.
U.S. investors could still buy Lulu shares. In addition, Lulu could generate investor interest and later shift to a U.S. stock market if it wanted.
Young has strong Canadian ties. He grew up in Canada and is the owner of the Hamilton Tiger-Cats of the Canadian Football League.
Lulu, which has 112 employees, lost $13.8 million in 2008 and $1.9 million last year. But in the fourth quarter it turned profitable, earning $140,000 versus a loss of $4.6 million a year earlier.
The preliminary prospectus doesn't specify how much the company plans to raise by selling stock, but says that 35 percent of the net proceeds would be used to repay $18 million in debt. That would mean that the company plans to realize than $50 million after deducting fees and expenses.
Lulu also plans to expand sales and marketing efforts and add new products and features.