Will Eventbrite’s history of losses weigh down its IPO?
September 3, 2018 | Blog

Will Eventbrite’s history of losses weigh down its IPO?

Eventbrite Inc, the event ticketing and services unicorn, recently filed its S-1 in advance of its IPO. Eventbrite’s potential IPO is well timed to take advantage of the very favorable IPO market and the fresh highs in equities markets.

At its most recent funding round in August 2017, the company was valued at $1.45 billion. Based on the recent performance metrics and growth projections in the company’s S-1, we believe the company’s post-IPO valuation could very well exceed $2 billion, assuming a mid-single digit revenue multiple on 2020 estimates.

The company’s IPO also points to another successful exit for VCs and private investors, including Sequoia Capital and Tiger Global Management.

Below are 10 observations from Eventbrite’s S-1.

  1. Eventbrite plans to raise up to $200 million. The company will trade on the NYSE under the ticker “EB.” Underwriters of the offering include Goldman Sachs, J.P. Morgan, Allen & Company and RBC Capital Markets.
  2. Strong revenue growth. Between the fiscal year 2016 and 2017, Eventbrite enjoyed a 51 percent increase in revenue, from $133.5 million to $201.6 million. The first half of 2018 has seen even stronger growth of 61 percent, from $88.2 million in 2017 to $142.1 million. However, we believe recent acquisitions have contributed to the accelerating revenue growth.
  3. History of losses. While the revenue growth is impressive, investors do have a reason to be cautious regarding the company’s history of losses. It has yet to achieve profitability. At year-end 2016 and 2017, Eventbrite posted accumulated deficits of $200 million and $238 million, respectively. The filing suggests that scaling will eventually result in profitability. Despite the slight decrease in net losses from 2016 to 2017, Eventbrite’s net loss increased in the six months ending June 30, 2018, to $21 million from $18 million in the six months ending June 30, 2017
  4. Large addressable market. The filing highlights the potential growth opportunity based on the significant size of the existing market. Eventbrite estimates that for 2018, the opportunity in its top 12 markets will total $3.2 billion in gross ticket fees, or about 1.1 billion tickets. In 2017, Eventbrite received fees from the sales of 71 million tickets. Effectively, Eventbrite benefits from a fairly low penetration in a large market opportunity.
  5. Opportunities from shifts in consumer spending. Eventbrite’s S-1 cites findings from the U.S. Bureau of Economic Analysis, which suggests consumer spending on experiences (as opposed to goods) has outpaced overall growth in consumer spending. Should this trend continue, the company could benefit from continued growth in its addressable markets.
  6. Broad range of competitors. Eventbrite faces competitive risks from established players, such as Live Nation Entertainment, owner of Front Gate Tickets, and Ticketmaster Entertainment. These formidable competitors are in addition to traditional event-management solutions and local or specialized competitors. Further competition has come from the large tech companies, such as eBay and Amazon, both of which have operated in ticketing services. In our view, the competition will only get tougher.
  7. Strong retention rates. In 2016 and 2017, Eventbrite enjoyed retention rates from “event creators” of 93 percent and 97 percent, respectively. As explained in the filing, “event creators” are the direct customers of Eventbrite who organize and create events. They benefit from the promotion and distribution services provided on the Eventbrite platform. That level of customer retention is a positive indicator about its ability to stave off competition.
  8. Growth through M&A. Eventbrite has supplemented its organic growth with a significant amount of M&A activity. Since 2015, Eventbrite has acquired seven companies, including Ticketfly, Ticketea and Picatic. Despite the risks associate with any acquisition, the company has demonstrated its ability to manage a fragmented landscape and successfully integrate acquired company operations.
  9. Effective strategic partnership strategy. To facilitate the ease of payment on its platform, Eventbrite partnered with Square, which is now the primary online processing partner for the company’s payment processing in the U.S., Canada, Australia, and the U.K. Strategic partnerships like this one should increase the efficiency of managing the complexity of transactions performed on the platform.
  10. Threat of security breaches. Just like any other online platform, Eventbrite faces the ongoing threat of cybersecurity breaches. This has already occurred at one of the companies it acquired. In 2018, Ticketfly experienced a data breach, which resulted in a recorded liability of $6.6 million.

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This report does not contain a complete analysis of every material fact regarding any issuer, industry, transaction, or security. The opinions expressed in this report reflect the judgment of the analyst at a specific point in time and are subject to change. The information contained in this report has been obtained from sources the analysts consider to be reliable; however, there is no guarantee the any of the information is accurate.

Securities referenced in this report may be offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice.

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Alejandro Ortiz

Alejandro Ortiz

Alejandro is a Research Analyst, Private Investment Research for SharesPost Research LLC. Prior to joining SharesPost, he was a Valuation Analyst at Duff & Phelps with a focus on TMT industries.

PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES

CONFLICTS

This report is distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation, and SP Investments Management, LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own financial advisors before making any investment decisions. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.

This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

ANALYST CERTIFICATION

The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about the subject matter therein, including all of the subject securities or issuers, and that no part of such analyst compensation was, is, or will be during their employ directly or indirectly related to their specific views contained in this report.

Analyst compensation is indirectly based upon the growth and success of SharesPost, Inc., including the overall performance of its subsidiaries, the individualized performance of any such analyst, and the development and progression of the overall research effort. SharesPost, Inc. earns revenue from, among other avenues, brokerage sales, and therefore the analyst may indirectly benefit from research reports that have the ultimate effect of increasing trading activity, either through SharesPost Financial Corporation and/or with SharesPost Investment Management, LLC.

DISCLAIMER

This report does not contain a complete analysis of every material fact regarding any issuer, industry, transaction, or security. The opinions expressed in this report reflect the judgment of the analyst at a specific point in time and are subject to change. The information contained in this report has been obtained from sources the analysts consider to be reliable; however, there is no guarantee the any of the information is accurate.

Securities referenced in this report may be offered by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice.

Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

SharesPost, the SharesPost logo, My SharesPost, the SharesPost Index, and SharesPost Investment Management are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.

Copyright SharesPost, Inc. 2019. All rights reserved.