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The IPO Price and the S11


In my What Is Going To Happen In 2019 post, I wrote: I expect we will see IPOs from big names like Uber/Lyft/Slack, although I also expect those deals will get priced well below the lofty expectations they have in mind right now. Some of that will be because of weak equity markets in the US, but it is also true that most of the IPOs in 2018 also priced below the lofty “going in” expectations of founders, managers, boards, and their bankers. The public markets have been much more sanguine about value than the late stage private markets for a long time now. And now we are starting to get the data from these IPOs. Lyft is on the road raising roughly $2bn at a post-deal valuation range of $16bn to $20bn ($62 to $68 per share). When I see an IPO price range, I like to go look at the S1 that the issuer has filed with the SEC prior to the road show. Here is Lyft’s S1. Here are the things I like to look for in a S1: 1/ The total shares outstanding. You can go to the table of contents of the S1 and look for the section called “Description Of Capital Stock”. In Lyft’s S1, it says there are ~240mm shares of Class A common stock plus some amount of Class B common that is not yet detailed. The Bloomberg article I linked to above says the company is going to sell 30.8mm shares at $62 to $68 per share. So there will be at least 270mm shares outstanding plus the Class B shares. The Bloomberg folks seem to be using a post deal share count of 288mm share so that is close enough. You get to fully diluted post deal valuation by multiplying the share count (288mm) by the range ($62/share to $68/share). 2/ Revenues and earnings/losses. You can go to the table of contents of the S1 and look for the section called “Selected Consolidated Financial And Other Data” and you will find the audited financial data. I like to find the quarterly numbers because that will give you a good idea of current growth rates. These are the numbers for Lyft: As you can see the quarterly revenues are growing at roughly $80mm a quarter so a back of the envelope guess on revenues for 2019 are [$750mm, $830mm, $910mm, $990mm] for a total of ~$3.5bn, up from $2.1bn in 2018 (yoy growth of 65%). You can also see that the contribution (net of cost of goods sold) has been about 45% over the past few quarters so if that ratio holds in 2019, there would be contribution of roughly $1.6bn in 2019. For the operating costs, you can look at the difference between contribution and EBITDA, which you can see here: Lyft spent ~$1.85bn on opex in 2019 ($921mm of contribution plus $943mm of EBITDA losses). That number grew from $1.1bn in 2017. I would expect Lyft’s operating expenses to be at least $2.25bn to $2.5bn in 2019. Which gets you to this possible P&L for 2019: Revenues – $3.5bn Gross Margin – $1.6bn EBITDA (loss) – $600mm to $900mm 3/ Valuation Ratios: At the mid-point of the offering range $18bn, the price to revenue multiple is roughly 5x (18/3.5) and the multiple of gross margin (what Lyft keeps after paying significant COGS) is roughly 11x (18/1.6). 4/ Time to cash flow breakeven. This is harder because you have to make some assumptions about growth rates beyond 2019 and opex growth rates. But if Lyft can grow revenues at 60% per annum for a few more years and keep opex growth rates to 25-30% per annum, then it could get profitable by sometime in 2021. This suggests that the $2bn it is raising may be sufficient to get profitable, but it will be close. So what does this mean for other late stage high growth high flyers? To me it says if you have company focused on a big opportunity (like transportation) that is growing at north of 60% per year it is worth in the range of 10-12x net revenues to wall street right now. Because Lyft only keeps about 45% of its revenues after very high COGS, that works out to be 5x revenues. Many late stage private companies are getting financed at valuation ratios in excess of this so they will have to grow into their eventual public market valuations. But that has been the case for quite a while now as the late stage private markets continue to pay higher prices for high growth companies than the public markets do. https://avc.com/2019/03/the-ipo-price-and-the-s1/

The IPO Price and the S11


In my What Is Going To Happen In 2019 post, I wrote: I expect we will see IPOs from big names like Uber/Lyft/Slack, although I also expect those deals will get priced well below the lofty expectations they have in mind right now. Some of that will be because of weak equity markets in the US, but it is also true that most of the IPOs in 2018 also priced below the lofty “going in” expectations of founders, managers, boards, and their bankers. The public markets have been much more sanguine about value than the late stage private markets for a long time now. And now we are starting to get the data from these IPOs. Lyft is on the road raising roughly $2bn at a post-deal valuation range of $16bn to $20bn ($62 to $68 per share). When I see an IPO price range, I like to go look at the S1 that the issuer has filed with the SEC prior to the road show. Here is Lyft’s S1. Here are the things I like to look for in a S1: 1/ The total shares outstanding. You can go to the table of contents of the S1 and look for the section called “Description Of Capital Stock”. In Lyft’s S1, it says there are ~240mm shares of Class A common stock plus some amount of Class B common that is not yet detailed. The Bloomberg article I linked to above says the company is going to sell 30.8mm shares at $62 to $68 per share. So there will be at least 270mm shares outstanding plus the Class B shares. The Bloomberg folks seem to be using a post deal share count of 288mm share so that is close enough. You get to fully diluted post deal valuation by multiplying the share count (288mm) by the range ($62/share to $68/share). 2/ Revenues and earnings/losses. You can go to the table of contents of the S1 and look for the section called “Selected Consolidated Financial And Other Data” and you will find the audited financial data. I like to find the quarterly numbers because that will give you a good idea of current growth rates. These are the numbers for Lyft: As you can see the quarterly revenues are growing at roughly $80mm a quarter so a back of the envelope guess on revenues for 2019 are [$750mm, $830mm, $910mm, $990mm] for a total of ~$3.5bn, up from $2.1bn in 2018 (yoy growth of 65%). You can also see that the contribution (net of cost of goods sold) has been about 45% over the past few quarters so if that ratio holds in 2019, there would be contribution of roughly $1.6bn in 2019. For the operating costs, you can look at the difference between contribution and EBITDA, which you can see here: Lyft spent ~$1.85bn on opex in 2019 ($921mm of contribution plus $943mm of EBITDA losses). That number grew from $1.1bn in 2017. I would expect Lyft’s operating expenses to be at least $2.25bn to $2.5bn in 2019. Which gets you to this possible P&L for 2019: Revenues – $3.5bn Gross Margin – $1.6bn EBITDA (loss) – $600mm to $900mm 3/ Valuation Ratios: At the mid-point of the offering range $18bn, the price to revenue multiple is roughly 5x (18/3.5) and the multiple of gross margin (what Lyft keeps after paying significant COGS) is roughly 11x (18/1.6). 4/ Time to cash flow breakeven. This is harder because you have to make some assumptions about growth rates beyond 2019 and opex growth rates. But if Lyft can grow revenues at 60% per annum for a few more years and keep opex growth rates to 25-30% per annum, then it could get profitable by sometime in 2021. This suggests that the $2bn it is raising may be sufficient to get profitable, but it will be close. So what does this mean for other late stage high growth high flyers? To me it says if you have company focused on a big opportunity (like transportation) that is growing at north of 60% per year it is worth in the range of 10-12x net revenues to wall street right now. Because Lyft only keeps about 45% of its revenues after very high COGS, that works out to be 5x revenues. Many late stage private companies are getting financed at valuation ratios in excess of this so they will have to grow into their eventual public market valuations. But that has been the case for quite a while now as the late stage private markets continue to pay higher prices for high growth companies than the public markets do. https://avc.com/2019/03/the-ipo-price-and-the-s1/

The IPO Price and the S11


In my What Is Going To Happen In 2019 post, I wrote: I expect we will see IPOs from big names like Uber/Lyft/Slack, although I also expect those deals will get priced well below the lofty expectations they have in mind right now. Some of that will be because of weak equity markets in the US, but it is also true that most of the IPOs in 2018 also priced below the lofty “going in” expectations of founders, managers, boards, and their bankers. The public markets have been much more sanguine about value than the late stage private markets for a long time now. And now we are starting to get the data from these IPOs. Lyft is on the road raising roughly $2bn at a post-deal valuation range of $16bn to $20bn ($62 to $68 per share). When I see an IPO price range, I like to go look at the S1 that the issuer has filed with the SEC prior to the road show. Here is Lyft’s S1. Here are the things I like to look for in a S1: 1/ The total shares outstanding. You can go to the table of contents of the S1 and look for the section called “Description Of Capital Stock”. In Lyft’s S1, it says there are ~240mm shares of Class A common stock plus some amount of Class B common that is not yet detailed. The Bloomberg article I linked to above says the company is going to sell 30.8mm shares at $62 to $68 per share. So there will be at least 270mm shares outstanding plus the Class B shares. The Bloomberg folks seem to be using a post deal share count of 288mm share so that is close enough. You get to fully diluted post deal valuation by multiplying the share count (288mm) by the range ($62/share to $68/share). 2/ Revenues and earnings/losses. You can go to the table of contents of the S1 and look for the section called “Selected Consolidated Financial And Other Data” and you will find the audited financial data. I like to find the quarterly numbers because that will give you a good idea of current growth rates. These are the numbers for Lyft: As you can see the quarterly revenues are growing at roughly $80mm a quarter so a back of the envelope guess on revenues for 2019 are [$750mm, $830mm, $910mm, $990mm] for a total of ~$3.5bn, up from $2.1bn in 2018 (yoy growth of 65%). You can also see that the contribution (net of cost of goods sold) has been about 45% over the past few quarters so if that ratio holds in 2019, there would be contribution of roughly $1.6bn in 2019. For the operating costs, you can look at the difference between contribution and EBITDA, which you can see here: Lyft spent ~$1.85bn on opex in 2019 ($921mm of contribution plus $943mm of EBITDA losses). That number grew from $1.1bn in 2017. I would expect Lyft’s operating expenses to be at least $2.25bn to $2.5bn in 2019. Which gets you to this possible P&L for 2019: Revenues – $3.5bn Gross Margin – $1.6bn EBITDA (loss) – $600mm to $900mm 3/ Valuation Ratios: At the mid-point of the offering range $18bn, the price to revenue multiple is roughly 5x (18/3.5) and the multiple of gross margin (what Lyft keeps after paying significant COGS) is roughly 11x (18/1.6). 4/ Time to cash flow breakeven. This is harder because you have to make some assumptions about growth rates beyond 2019 and opex growth rates. But if Lyft can grow revenues at 60% per annum for a few more years and keep opex growth rates to 25-30% per annum, then it could get profitable by sometime in 2021. This suggests that the $2bn it is raising may be sufficient to get profitable, but it will be close. So what does this mean for other late stage high growth high flyers? To me it says if you have company focused on a big opportunity (like transportation) that is growing at north of 60% per year it is worth in the range of 10-12x net revenues to wall street right now. Because Lyft only keeps about 45% of its revenues after very high COGS, that works out to be 5x revenues. Many late stage private companies are getting financed at valuation ratios in excess of this so they will have to grow into their eventual public market valuations. But that has been the case for quite a while now as the late stage private markets continue to pay higher prices for high growth companies than the public markets do. https://avc.com/2019/03/the-ipo-price-and-the-s1/

Diversity


Source: http://themusingsofthebigredcar.com/diversity/ Today we talk diversity in a big sun ATX day — 65F with just a few clouds. So, the issue of diversity keeps being bandied about. I was speaking to a person with whom I had worked as a CEO for about a dozen years. We were trying to assess whether that company was “diverse.” He said, “I don’t think what we did was impacted by some specific goal of creating diversity as that word is used today.” I agreed with him, but I noted that we were extraordinarily diverse by the standards of today. Who knew? I was “woke” before woke was woke. Big Red Car, what exactly is diversity? Before we can define it, I think we need to define the characteristics that make people different. I see it breaking down into the following characteristics:  1. Race, ethnicity, culture  2. Gender  3. Generational, age  4. Religious or spiritual beliefs  5. Sexual orientation  6. Education, skills  7. Economic status  8. Veteran status  9. Disability status 10. Philosophy of life, politics I limited myself to ten, but I could come up with a few more, but that’s enough to work with. Do you agree? People will have some or none of these characteristics — such as an Irish/German, male, Baby Boomer, Episcopal, straight, engineer-MBA, well off, Veteran, with no known disabilities, conservative. It is a bit more complex than Old White Guy or progressive. I don’t think most folks get beyond a handful of the above characteristics before they jump into the deep end of the discussion. OK, so what is diversity, Big Red Car? Diversity is the condition of a group being composed of people with different characteristics with the objective of creating a stronger organization by being able to access their different strengths. The underlying theme is that a diverse group should function at a higher level than a group with no diversity. Is that true? Or, do we want it to be true? I will leave that to your imagination to ponder. The other consideration is that diversity is an outgrowth of discrimination that historically damaged a group of people. Racial discrimination was and is a reality, so a diverse group would, by its very composition, diminish that unfavorable impact on the group. Would a group that was evenly composed of women and men be stronger than one composed solely of women or men? [We are going with Mother Nature here — women and men. We are ignoring for the sake of argument such gender identifications as “questioning,” “neither,” and “androgynous.”] Is it all just politics, Big Red Car? You can make that call, but it is fair to note that much of what we deal with today is driven by political concerns. Some of the big high tech companies in Silicon Valley conducted a public wake after the election of President Donald J Trump thereby validating the notion that the political leanings of the senior management of these companies was part of the company culture. We had big time founders in tears as if their dog had died. It was a spectacle. This also revealed a huge void in the intellectual diversity of these companies — many of whom would self-identify as being diverse and champions of diversity — well, except if you didn’t support their political views and candidates. We have gone from a fairly easy to understand heterosexual and homosexual (gay) identification system to including heterosexual, homosexual, lesbian, bisexual, pansexual, polysexual, and asexual. The man on the street would make a D- if required to define those distinctions. I admit to reviewing their definitions as I wrote this blog post. In addition, we are asked to recognize that sexual identity is fluid meaning that persons may have a different sexual orientation at different points in their lives. The focus on the sexual orientation of people is tied to the gay marriage evolution. Gender gets mixed into this because of the public outcry against legislatures that tried to provide some order to who uses what bathrooms. Some states applied an understandably simple test — “What does it say on your birth certificate?” This is another example of the fluidity of self-assignment — similar to sexual orientation — that seems to confuse the issue of diversity. What is the benefit of diversity, Big Red Car? The benefit is as noted earlier — a higher performing organization because the group can tap into the breadth and depth of talents available because of the different individual strengths and life experience of its diverse membership. When one looks at that definition objectively, it is not difficult to say, “Sounds like a good idea.” Another outcome is the elimination of discrimination based on the same characteristics. If you have a mixing of genders, then you have a higher probability of breaking down stereotypes and developing an enlightened appreciation for the possible. Substitute “genders” for whatever is your favorite characteristic and say the same thing. Now, the big question, is this — “Is it really true?” You can start a fight in any bar with that question, friend. Is it true, Big Red Car? Ahhh, dear reader, you will have your truth. I shall have mine. What we seek is THE truth which is a out of season and difficult to capture on any day. I think there is room for debate on this subject. I do think there are elements of diversity that one may plan into an organization, but it will not likely happen by accident. I cannot tell you the number of adherents and evangelists for diversity who when you look at a picture of their company, group, organization — there is no evidence that they walk their talk. In the startup world, one has to look at venture capital firms, as a simple example no better or worse than anyone else, and they would be at the bottom of the diversity totem pole, but they preach it like a Baptist tent revival on a hot July Saturday night. Problem areas, Big Red Car? I see some areas as being fraught with peril. Let me just throw them out for you. Not an inclusive list.  1. Confused cultural identification — Let’s say you are a first generation Korean living in Philadelphia. Your parents emigrated to the United States. They are native Korean speakers. You speak English as your first and only language and have never developed a taste for kimchi. If you have ever been to Korea, you will understand the “kimchi” observation. Do you arrive at a company’s doorstep ready to strengthen their culture with your Korean cultural experiences? You may look slightly different, but are you?  2. Ageism — Amongst all the current discriminatory practices in business today, in Silicon Valley, is ageism. Companies like Google attempt to mix seasoned workers with whiz kids and are surprised to find that the seasoned folk do not want to go to a strip club to discuss their team project. Venture capitalists — many of them subject to the same discrimination — do not look at a fifty year old founder with the same lens as they would with a twenty-five year old founder. In many instances, this is purely ignorance because the VCs do not have a working knowledge of the seasoned entrepreneurs.  3. Conservatives — Being a philosophical conservative is the kiss of death in Silicon Valley or Hollywood. One has only to listen to the funeral dirges sung at the results of the recent election. Intellectual diversity is non-existent in the startup world. There are one or two others I could include, but this is enough to make a thinking person consider what real diversity is and should be. So, dear reader, there you have it. Is diversity a good thing? A real thing? An attainable thing? Is it just a new form of discrimination built on different building blocks? Your Big Red Car falls on the side of hiring the very best persons available to do the job. This makes diversity an important, but secondary consideration in the hiring process. A good  company will respect the diverse backgrounds of its people, but not before it builds a great company. But, hey, what the Hell do I really know anyway? I’m just a Big Red Car. Have a great day. It’s March Madness!   Share this:EmailTweetShare on TumblrPrint Related Source: http://themusingsofthebigredcar.com/diversity/

Mapping of the forests of Karnataka


   During the year 2003, the Government of Karnataka had, vide Government Order No. FEE 204 FAP 2001 dated 03-01-2003, assigned the task of creating a geo-spatial database for 19 forest divisions of the state to the Karnataka State Remote Sensing Application Center (KSRSAC), Bengaluru. For the remaining 18 divisions, geo-spatial database had already been developed by the Forest department mainly under the Western Ghats Forestry and Environment Project (WGFEP), which had a project component regarding development of Geographic Information Systems (GIS) and application of Remote Sensing (RS) technology for forest management by KFD. However, as the database for these 18 divisions was developed through a number of agencies (vendors), there were certain incompatibilities in unifying the database. In order to generate a uniform baseline data for the entire state, it was considered necessary to standardize the database of these 18 divisions so as to make it compatible with the database being developed by KSRSAC for the 19 divisions. Keeping this in view, the Government, vide another Government Order No. AaPaJee 43 FAP 2004 dated 04-03-2004, assigned the task of standardization of the geo-spatial database of the 18 forest divisions also to the KSRSAC. It was agreed upon that the KSRSAC would take up the task of fresh interpretation of all these 18 forest divisions using the existing geo-spatial database as an ancillary data for reference. In addition, the work of creating a geo-spatial database for all the protected areas (PA) was also taken up by KSRSAC. In short, the KSRSAC was assigned a comprehensive project to generate database using GIS and RS to be used for planning and management by the Karnataka Forest Department.   The objectives of the KSRSAC project were:1. To generate a geo-spatial database comprising of revenue and forest administrative boundaries, transportation network, drainage network, slope maps, etc.2. To acquire process and interpret remotely sensed data to generate a geo-spatial database containing the various forest types/density classes.· Forest types viz., Evergreen forests, Semi-evergreen forests, Moist Deciduous forests, Dry Deciduous forests, Mangroves, Scrub forests, Forest Plantations, etc.· Canopy density classes viz., 0-10%, 10-25%, 25-40%, 40-70% and >70%. 3. To provide tool for viewing, querying and analyzing the above mentioned geographic data generated in the form of customized standalone software –VASANTHA.   The KSRSAC procured the satellite data required for the project from the National Remote Sensing Agency (NRSA), Hyderabad. The data included PAN+LISS III merged Satellite data (Spatial Resolution 5.8 m) and PAN data (Spatial Resolution 5.8 m) pertaining to the period (Dec 1999 – March 2000). These two data-sets were used to delineate Forest Type / Density Classes and to differentiate the Density Classes respectively. LISS III data of second season (Spatial Resolution 23.5 m) was also used to differentiate the Forest Types.   The KSRSAC had used ancillary data from various sources such as Working Plans, FSI thematic maps, Village maps procured from the Department of Survey Settlement and Land Records, Administrative boundary sketches of the KFD, Survey of India (SOI) topo-maps, Inventory records of the KFD and Maps procured from the French Institute, Poduchery. A lot of ground truth information was also collected regarding division-specific spatial attributes for each representative class using Global Positioning System (GPS).   The methodology adopted by the KSRSAC consisted of Image Processing followed by Geo-referencing and then Mosaicking and Subsetting. This resulted in generation of division- wise Satellite data. This was followed by Reconnaissance Survey in which the landscape was traversed for collecting ground truth information. This exercise resulted in the preparation of Interpretation Key to assist in the task of On Screen Interpretation. Then Preliminary Maps were generated and, after these maps were taken to the field for ground truth verification and cross- checking with other ancillary data, Draft Maps were generated. The Draft maps were again sent for field validation, and after incorporating the feedback received from the field, Final Maps were generated. The KSRSAC generated the following outputs for Karnataka Forest Department during the year 2006.1. Geo-spatial Database;2. Hardcopy maps;3. Seamless Mosaic;4. Division-wise Atlas;5. GIS Data Browser - VASANTHA.     For a comprehensive assessment and understanding of the forest cover scenario at the state level, the districts have been divided into three groups: Belagavi, Uttara Kannada, Shivamogga, Chickkmagaluru, Udupi, Hassan, Dakshina Kannada, Kodagu, Mysuru and Chamarajanagar have been grouped as districts receiving high rainfall (Malnad). The districts of Dharwad, Gadag, Haveri, Davanagere, Chitradurga, Tumkur, Bengaluru (Urban), Bengaluru (Rural), Ramanagara and Mandya have been grouped as districts receiving medium rainfall (Semi-Malnad). The districts of Bagalkot, Vijayapura, Bidar, Kalaburagi, Yadagiri, Raichur, Koppal, Ballari, Kolar and Chikkaballapur have been grouped as districts receiving low rainfall (Bailuseeme or Maidan).(Source: This is an abstract taken from the book, 'Status of forests in Karnataka'. The author is Mr. Dipak Sarmah.)