Online ticketing company Eventbrite (like the modern-day Ticketmaster for smaller businesses looking to host events) had its first day of trading on the New York Stock Exchange last Thursday under the ticker symbol ‘EB’.
The company priced shares at $23 on Wednesday, with an implied valuation above $1.76 billion as it raised $230 million for its IPO.
Last Thursday, shares opened at $36 and climbed as high as $39.30 (up 70% from their Wednesday pricing) before ending the day up 59% at $36.50.
Eventbrite joins a growing pool of tech companies to hit the market this year, including consumer companies Spotify and Dropbox and business software providers DocuSign, Zuora and Domo. With its first-day gains, Eventbrite's IPO is one of the biggest opening-day pops in recent months.
Here's a look at the numbers behind Eventbrite, but first, here’s a quick note on what some of the terms mean:
Note: EV means Enterprise Value and is thought of as the ‘accurate’ value of a company, meaning the value of a company if it were to be acquired (bought) by another company.
As an example, if let’s say Ticketmaster bought Eventbrite, it would have to pay the following to acquire them: market capitalisation price (share price multiplied by the total number of shares outstanding/issued), plus it would have to pay any debts Eventbrite has. Any cash that Eventbrite has would be deducted from the sale’s price, as the cash can be used to pay out some of the debts.
EV is therefore, the sum of the market value of equity (market capitalisation), plus the market value of debt of a company, minus any cash the company has.
Forward revenues means the expected revenue the company will make.
EV/Forward Revenues therefore means the expected revenue the company will make in comparison to the company’s current value. This is one method investors use to determine the underlying value of a company before they invest.
With 2018 forward revenues (expected revenue) of $300 million, the EV/Forward Revenues of Eventbrite would equal 4.5x, which is not expensive in comparison to the value of other tech companies. For example, Twitter’s EV/Forward Revenues back in 2013 post IPO was 21x.
Eventbrite is not profitable and has been losing money since 2016. It posted losses of $40.4 million in 2016 and $38.5 million in 2017. In the first six months of 2018, the company has posted a net loss of $15.6 million. To make up for this, they announced some pricing changes to customers in the lead up to their IPO, read more about it here.
Eventbrite’s revenue grew by 51% from $133 million in 2016 to $201 million in 2017, and it rose 61% in the first half of 2018 relative to the same period in 2017.
Some other key things to know about Eventbrite:
Eventbrite relies heavily on word-of-mouth to draw users to its platform; the company disclosed that more than 95% of the ‘creators’ (clients) that use its service signed up for it themselves.
Eventbrite last year boasted a 97% retention rate, which referred to the volume of ticket fees the company generates from creators in 2017 versus in 2016.
Creators who signed up on their own generated 54% of the company’s net revenue last year, according to the prospectus.
Google (NASDAQ:GOOG) (NASDAQ:GOOGL), Facebook (NASDAQ:FB), Spotify (NYSE:SPOT) and Salesforce (NYSE:CRM) are said to be partners of Eventbrite.
Well-known investors T. Rowe Price, Sequoia Capital and Tiger Global all acquired shares in Eventbrite.
The company created a dual-class share structure, in which pre-IPO shareholders got their stock converted into Class B shares, which are worth 10 votes each. Owners of the new class A shares will be entitled to one vote per share. Eventbrite is following in the footsteps of a number of prominent tech companies that make use of dual-class structures to ensure that voting power stays with current investors and shareholders.
Potential Concerns:
Eventbrite has acquired seven companies since 2015. These include Ticketfly, which was purchased from Pandora Media Inc. for $200 million last year and recently had a data breach, read more about it here.
Eventbrite disclosed among the risk factors in its prospectus that labour unrest related to wages and benefits in Argentina could impact on operating expenses. Likewise, if the peso strengthens against the US dollar, it could also have a negative impact. 111 of the company’s employees are based in Argentina, and most of them are engineers.
Sequoia Capital which owns more than 20% of Eventbrite has also been an investor in some of today’s most influential and instrumental companies such as Airbnb, Dropbox, GitHub, Google, Houzz, Hubspot, Instagram, LinkedIn, Nvidia, PayPal, Reddit, Stripe, Tumbler, WhatsApp, Yahoo – just to name a few!
They’ve shown that they’ve been able to pick the unicorns out of startup community, will Eventbrite be the next winning ticket for them and other investors that buy their shares?
Please know, the value of investments can go up as well as down and you may receive back less than your original investment, meaning, when investing your capital is at risk.
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