One more IPO for the road
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Lest you think that our Musk-a16z presidency riff yesterday went too far — apologies to the folks who wrote in that the headline made them want to expire — the Free Press agrees: “Elon Musk is president.”
We’re both half kidding, but in case you wanted to know what the post-Dobbs right is saying, there you go. (More here on tech’s current influence, and occasional lack of pull, in recent Trump staffing decisions.)
We’ve had first breakfast one self-driving IPO from China, yes, but what about second breakfast another self-driving IPO from China?
WeRide went public in late October for $15.50 per share. Its equity spiked earlier this week, reaching a 52-week high of $22.69, before retreating to $15.79 at the close yesterday. Not insanely bullish, but not a massacre either. At least WeRide is still above its IPO price, and is set to gain a few points back according to pre-market trading.
While WeRide was getting its books together and its shares floated, we’ve also been counting down until Pony.AI got itself public. Thankfully our wait is nearly over. As Renaissance Capital reported yesterday:
[Pony.AI] plans to raise $180 million by offering 15 million ADSs at a price range of $11 to $13. New investors have indicated on $75 million worth of ADSs in the offering (42% of the deal), and the company plans to raise an additional $153 million in a concurrent private placement. At the midpoint of the proposed range, Pony AI would command a fully diluted market value of $4.6 billion.
Pony did $24.7 million worth of H1 2024 revenue, putting it on a roughly $50 million run rate. However, the company’s results have been historically weighted towards to the back-half of the year. Meaning that it’s likely that Pony will best the $71.9 million it recorded in calendar 2023.
Let’s call it $100 million in 2024 to be generous. At that revenue result for 2024, Pony would trade for around 46x revenues. That’s incredibly not-cheap, implying that investors are willing to buy into Pony’s potential more than they are into its trailing results. That’s bullish!
And not without precedent. WeRide’s H1 2024 revenues ($20.7 million), were smaller than what it recorded in H1 2023, a year in which WeRide saw just $55.3 million worth of top line. Let’s be generous and say that WeRide will manage to reverse its declining 2024 revenue results, and get to, say, $75 million worth of top line this year. That would put its $4.33 billion present-day valuation at a revenue multiple — loosely — of 58x.
Jesus!
You can explain the enthusiasm simply by noting that there’s data — WeRide cited it! — projecting quick growth in the robotaxi business in China. Recent Waymo results make it clear that there’s ample domestic demand for self-driving car services. And the WeRide and Pony IPOs offer retail investors a shot at backing something that could have real growth ahead of it.
CO wrote this when parsing WeRide’s numbers:
Why the enthusiasm? Well, if you combine L4 self-driving tech, a nascent robotaxi business, and a big bloc of new capital, you can do quite a lot. […] Buying and kitting out enough robotaxis to build a real automated ride-hail empire is expensive. Hence, an IPO with a fat run of concurrent placements. After it debuts, WeRide will have all the capital it needs to build out that fleet and massively scale its revenues.
I like the WeRide IPO because we’re not seeing a fully-baked company list. This is not a concern that has had all the value juiced from it already. No, here we see a promising technology company set to float and raise a pile of money as it trains its sights on rapid monetization. WeRide’s listing is an interesting wager for public-market investors to consider, in other words.
A similar note to what we wrote about Pony:
Pony is a company running a -207.6% net deficit in the first half of 2024 with the start of a robotaxi fleet in its home country and a bit more proven commercialization of its self-driving truck technology. That makes it an exciting wager more than a proven entity; there’s still growth on the bone here, with the company not waiting to go public until all risk — and, therefore, potential return — is ameliorated by private capital and time.
Am I saying you should back the company? No. I remain a pretty hardcore index fund guy, but at the same time, it’s neat that the folks who might have looked at Waymo with dismay that they could not directly invest will now have another option on which to bet their capital.
I wonder if part of the reason why Pony and WeRide are valued as richly as they are, or may be, is because they are investable. By that I mean that you can’t invest in Waymo directly, and buying Alphabet shares is more a bet on search ads than self-driving. Here, however, are two stocks that are pure-play-ish. If you wanted to bet directly on Waymo, perhaps Pony and WeRide are the closest you can get.
No matter how we feel about the valuations, another tranche of capital is heading in the direction of self-driving technology, and that brings me joy.
Upcoming on CO: An interview with the CEO of a public company and the CEO of the startup he just purchased; and, a chat with one of my favorite investors about the largest tension today in venture-land. (And, no, it’s not politics.) — Alex