Virgin Mobile Quintuples IPO Target

Virgin Mobile USA isn’t cow-towing to a skeptical market. Instead, even as rival Amp’d Mobile imploded and the industry questioned the MVNO model, Richard Branson’s company increased its IPO goal fivefold.

The five-year-old prepaid mobile services provider, which is owned jointly by Sprint and the U.K.’s Virgin group, initially planned to raise $100 million through its IPO. In mid-July, however, it upped that to $506 million. The company expects to trade on the New York Stock Exchange in an IPO underwritten by Bear Stearns, Lehman Brothers and Merrill Lynch.

Virgin Mobile would not explain its rationale for upping its IPO goal. “We’re not able to comment at this time,” a spokesperson tells xchange.

However, the company told the SEC in a July filing that it recorded $339.3 million in sales during the first quarter of 2007, while turning a $15.4 million profit. That marked the first time Virgin Mobile, which lost $36 million last year, made money. While that may have dispelled some doubts that the MVNO model can be a viable one, this IPO seems to be a wildcard.

“I think Virgin is going pretty strong, and I think it’s going to bring new blood to the market,” says Ahmet Ozalp, a partner with Atlas Venture. But he adds: “This is not a time where every IPO will be great. People are very selective.”

Matt Niehaus, a partner at Battery Ventures, agrees, yet wonders how investors will receive the IPO. “The MVNO space has been really ugly — is there a valuable, sustainable business here?” he questions.

At the end of March, Virgin Mobile claimed to have 4.9 million subscribers, mainly in the youth demographic.

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