- Trulia's Current IPO Price Range $14-$16 / Share: PrivCo's Fair Value of Trulia =$33 / Share (Double Current Price Range)
- Largest IPO Backlog in Years Should Begin To Clear This Week
September 19, 2012 1:15 am EST – The September IPO pipeline has an enormous backlog, even by the standards of the normal post-summer IPO lull, with PrivCo tracking at least 210 US private companies with IPOs pending (including several dozen confirmed by PrivCo having filed under the recent Confidential IPO provisions of the U.S. JOBS Act). The backlog has been made worse by the weak Facebook (Nasdaq:FB) IPO, and the Facebook IPO's massive size as well, that sucked scarce IPO investor dollars like oxygen out of the room. (Horrendous post-IPO performances from other consumer Internet names such as Pandora, Zynga and Groupon have also thrown a wet blanket on the IPO market).
Nevertheless, the usual summer dry spell for the IPO market is over as September is poised to potentially roar back with a string of private companies slated to test the IPO market, with the first expected to price at the end of this week. The large size of the current IPO pipeline will force private companies to vie for attention from investors, who are currently favoring enterprise software and avoiding the consumer Internet sector that has so badly burned IPO investors this year. Furthermore, many of the initial IPOs testing the market are small by recent IPO standards.
PrivCo reviews three of the high profile private companies with IPOs expected to price this month:
Trulia (PrivCo Private Company Ticker: TRULIP) [NYSE:TRLA], the popular online and mobile residential real estate site for home buyers, sellers, renters and agents is looking to price on the New York Stock Exchange this week. In its S-1 filing, Trulia executives stated that the proceeds from the IPO will be used to expand business and infrastructure. Also expected to enter the markets this week is electric vehicle manufacturer Smith Electric Vehicles (PrivCo Private Company Ticker: SMITP) [NASDAQ: SMTH], who will be using the additional funds to pay down debt and expand to a planned new facility in New York. Waiting in the wings for an IPO sometime later this month or early October is the world’s leading online automotive marketplace, Autotrader.com (PrivCo Private Company Ticker: AUTOP) [NYSE: ATG]. Plans for the proceeds will be directed at paying down the company’s high debt load.
(Sep. 18, 2012):
PRIVCO's SUMMARY OF KEY FACTS ON THREE IPOs ON THE CALENDAR:
1. TRULIA, INC. (PrivCo Private Company Ticker: TRULIP)
Offering Size: 6 Million Shares (83% Primary, 17% Secondary)
Filing Range: $14-$16
Revenue: $77M (2012E), $39M (2011), $20M (2010), $10M (2009)
1 Year Revenue Growth (2010-2011): 94.7%
Net Income: -$6M (2011), -$4M (2010), -$7M (2009)
Offering Amount (Midpoint): $90 million
Proposed Ticker: NYSE:TRLA
Trulia Enterprise Valuation Sought: $394M (at mid-point of range)
PrivCo Equity Fair Value: $33 / Share (Using comparable company revenue analysis including Zillow (Nasdaq:Z))
Expected Trading Begins: September 19th, 2012
Use of Funds: General corporate purposes, including working capital
Zillow (Nasdaq:Z) has performed phenomenally, up 113 % since its IPO. IPO Investors love to compare companies directly to something that they know has recently worked. Trulia will benefit from that as it is asking for a EV/Revenue (LTM as of June 30, 2012) Multiple of 6.4 times, compared to Zillow asking for EV/LTM Revenue (March 31, 2011) of 14.4 times.
"Made for Mobile": nothing more mobile than house hunting. With Trulia mobile, you can simply click on your mobile phone to see floor plans, contact agent for last minute viewing, making the entire process on the go, something that Trulia is taking advantage of.
In the real estate ecosystem, a Trulia subscription has become a must-have, with an appetite also from house hunters who take advantage of a lower price point subscription offering to look up comparable sales in the area. Recurring revenue, if anything, is a very important metric for predictable earnings visibility as a public company.
Trulia is a sales-force focused company that, unlike Facebook and others, sell ads that consistently perform well for clients (according to PrivCo research). Also, Trulia has gained particular traction recently in its Media Sales (ad sales) arm. Trulia's sterling sales management team is overseen by COO Paul Levine, a veteran with over a decade of experience leading sales forces selling online local and mobile at Yahoo (NASDAQ: YHOO) and Eventbrite (PrivCo Private Company Ticker: EVENBP), and VP of Sales Eric Oldfield, a longtime internet sales professional with proven traction in media sales at email marketing firm LiveIntent (PrivCo Private Company Ticker: LIVEP). Throw in rising stars such as Michael Morris - whom Trulia hired from LiveIntent - with satisfied repeat ad customers ranging from Verizon to JP Morgan Chase's mortgage arm and Liberty Mutual's homeowners insurance division, and Trulia has a winning recipe on the sales side.
Trulia Risks: Trulia's primary risks as an investment is its revenue concentration: Top 10 advertisers made up over 60% of revenue in first half of 2012. However, this is something that has been true for a while and is a "high class problem", as the sales team is retaining its biggest clients, who continue to spend more year after year, and delivering a positive ROI.
2. SMITH ELECTRIC VEHICLES CORP. (PrivCo Private Company Ticker: SMITP)
Offering Size: 4.45 Million Shares (95% Primary, 5% Secondary)
Filing Range: $16-$18
Revenue: $52M (2012E), $49M (2011), $36M (2010), $23M (2009)
1 Year Revenue Growth (2010-2011): 40%
Net Income: -$53M (2011), -$30M (2010), -$18M (2009)
Offering Amount (Midpoint): $76 million
Enterprise Value: $504M
Proposed Ticker: NASDAQ: SMTH
Expected Trading Begins: September 20th, 2012
Co-Managers: CRT Capital
Use of Funds: Repayment of up to $15.5 million of indebtness and other general corporate purposes including capital expenditures and working capital
- World leader in manufacturing of electric vehicles with big name customers: FedEx, DHL, Coca-Cola, Frito-Lay, etc.
Smith’s sales force is able to sell in bulk, direct to corporations and different government organizations, cutting out the middleman and dealership model that Tesla Motors (NASDAQ: TSLA) struggles with.
- Risks: Facing stiffer competition from bigger, better capitalized firms like Ford (NYSE: F), Volvo and Isuzu. Government support waning after a 2010 Department of Energy audit found “significant deficiencies” in accounting practices.
3. AUTOTRADER GROUP, INC. (PrivCo Private Company Ticker: AUTOP)
Offering Size: To Be Announced
Filing Range: To Be Announced
Revenue: $1,205 (2012E), $1,025M (2011), $738M (2010), $629M (2009)
1 Year Revenue Growth: 39%
Net Income: $68M (2011), $49M (2010), $10M (2009)
Offering Amount (Expected): $300 million
Proposed Ticker: NYSE: ATG
Expected Trading Begins: To Be Announced
Co-Managers: Allen & Company, Barclays Capital, Citigroup Global Markets, Deutsche Bank, SunTrust Robinson Humphreys, Wells Fargo, RBC Capital Markets, Raymond James & Associates, Evercore Group LLC, Guggenheim Securities LLC, Mizuho Securities USA, Needham & Company, SMBC Nikko Capital Markets, The Williams Capital Group
Use of Funds: Reduction of debt, general corporate purposes including working capital
- Largest digital automotive marketplace in the world with over 28 million average monthly unique views (with 3.6 million daily unique new and used car listings).
- Strong, profitable operating history (consistent growth in both revenue, net income and EBITDA).
- Autotrader is heavily indebted: $1.3 billion debt with annual interest of $34 million (half of 2011 net income).
- Investors took out a $400 million line of credit to pay themselves a $400 million dividend.
- The lead generation business model is antiquated and is facing competition from disruptive new business model of TrueCar.com (PrivCo Private Company Ticker: TRUWP): “haggle-free”, transparent car buying experience.
- Declining revenue growth rate reflecting the increased competition Autotrader faces: TrueCar.com, Cars.com, Edmunds.com, Google, Yahoo, etc.