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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DISCLAIMER: This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, a member of 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 and involves a high degree of risk. It should only be considered as a long-term investment. You must 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. You should complete your own independent due diligence regarding the investment, including obtaining additional company information, opinions, financial projections, and legal or other investment advice.

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Rohit Kulkarni

Rohit Kulkarni

Rohit is the Managing Director, Private Investment Research for SharesPost Research LLC. Prior to joining SharesPost, Rohit was a Vice President, Senior Analyst at RBC Capital Markets.
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CONFLICTS: This report is being published by SharesPost Research LLC and 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. SP Investments Management is the investment manager of the SharesPost 100 Fund, a registered investment company, and other funds.

Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. 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 services. Registered representatives of SharesPost Financial Corporation do not (1) advise any member on the merits or advisability of a particular investment or transaction, (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services.

Information regarding companies in the SharesPost 100 List available on the website has been collected from or generated from publicly available sources. The availability of company information does not indicate that these companies have endorsed, supported, or otherwise participated with SharesPost. Company “thesis” is the opinion of SharesPost and is not a recommendation to buy, sell, or hold any security of such company.

Investors should be aware that, at any given point in time, the SharesPost 100 Fund (the “Fund”) may or may not have an ownership interest in any of the issuers discussed in the report. Accordingly, investors should not rely on the content of this report when deciding whether to buy, hold, or sell interests in the Fund. Instead, investors are encouraged to do their own independent research. Before investing in the Fund, investors are cautioned to carefully consider the investment objectives, risks, charges, and expenses before investing. For a prospectus containing more information about the Fund, please visit www.sharespost100fund.com. Read the prospectus carefully before investing.

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

Analyst compensation is based upon various factors, including the overall performance of SharesPost Inc. and its subsidiaries and the performance and productivity of such analyst, including (1) feedback from clients of the SharesPost Financial Corporation and other stakeholders in our ecosystem, (2) the quality of such analyst’s research, and (3) the analyst’s contribution to the growth and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost Inc., including brokerage sales.

DISCLAIMER: This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.

Any securities offered are offered by SharesPost Financial Corporation, a member of 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 and involves a high degree of risk. It should only be considered as a long-term investment. You must 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. You should complete your own independent due diligence regarding the investment, including obtaining additional company information, opinions, financial projections, and legal or other investment advice.

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, SharesPost Investment Management, the SharesPost 100 Fund, and the SharesPost 100 List are all registered trademarks of SharesPost Inc. All other trademarks are the property of their respective owners.

Copyright © SharesPost, Inc. 2019. All rights reserved.