By Peter Jobes
Car sharing marketplace, Turo Inc has launched its filing for a stock market floatation in the United States. The Daimler AG-backed startups also revealed its finances for the first time, highlighting a 207% jump in revenue in 2021. With the company well on the road to profitability, Turo’s debut looks set to become 2022’s first major listing. But is it a solid buy opportunity for investors?
The peer-to-peer car-sharing platform filed for its IPO in early January, according to an S-1 document filed with the US Securities and Exchange Commission. The San Francisco-based startup didn’t disclose the number of shares it plans to offer or a proposed price range. However, we do now know that Turo will list on the New York Stock Exchange under the symbol TURO.
Lead underwriters will also include the likes of Morgan Stanley and JP Morgan.
“Turo is a company that provides a platform where it connects car owners with renters, the company is also called "Airbnb for cars". For example, any car owner can register their car for future rental,” notes Maxim Manturov, head of investment advice at Freedom Finance Europe.
“The platform offers a registered car for trips with rentals for hours, days or weeks. As of September 30, 2021, the company had more than 85,000 active hosts, more than 160,000 cars and 1.3 million active guests. The platform operates in the US, Canada and the UK and provides its services in over 7500 cities.”
(Image: Bloomberg Second Measure)
As the chart above shows, Turo has emerged as a market leader amidst a rapidly growing car rental marketplace.
In the wake of the Covid-19 pandemic and the rise of working from home, a market is growing for cars that are accessible on-demand, as opposed to vehicles for everyday use.
So what could Turo’s IPO look like? Although the company is revealing little in terms of price ranges and the number of shares on offer, we can take a deeper look into the company’s fundamentals to gain a comprehensive insight into the startup.
What do Turo’s Fundamentals Look Like?
Let’s explore the financials behind Turo. Thanks to the company’s S-1 filing, we now know that the company generated $149.9 million in net revenue throughout 2020 - representing a 6% growth from the year prior.
Turo’s net losses in 2020 were $97.1 million, representing a slight improvement on the $98.6 million in net losses reported in 2019.
The profitability of Turo stems from a couple of drivers for its revenue growth. The first is a digital tool called Turo Risk Score. This feature, which was implemented in April 2020, works to dynamically adjust the fees that Turo charges guests to take out a booking.
Turo claims that the tool, along with hosts increasing the prices for vehicles offered to guests, has contributed to a greater net revenue over the course of 2020.
Turo’s 2021 performance, however, was even better. The company generated $330.5 million in revenue over the first nine months of 2021 alone - representing a 207% increase from the $107.8 over the same period in 2020.
As with many periods of growth, Turo’s losses also grew. Up to $129.3 million for the first nine months of 2021 from just $51.7 million for the same period in 2020.
The company attributes this growth to the increasing number of bookings over longer periods of time taking place each day. Gross booking value also rose in 2021.
Could Turo’s IPO be a Success?
There’s little doubting Turo’s business model. The company’s exponential growth in recent years has provided an insight into a marketplace that’s ripe for innovation.
However, one of the big challenges ahead for the stock will revolve around its performance after the pandemic and in the age of the new normal.
Covid-19 has turned lifestyles upside down with lockdowns and social distancing measures. Although trends suggest that we’ll a continuation of working from home, nothing is certain and the necessity of car ownership may return in the future.
Turo underwent a Series E fundraising round in July 2019, raising $250 million and officially earning the company its unicorn status. Turo followed this success up with a $30 million extension round the following February. The company’s total funding to date now stands at $500 million.
However, it’s fair to say that Turo’s business model offers a completely different proposition than 2019 and early 2020.
Whether the car-sharing company is a buy for investors depends heavily on just what the age of the new normal will mean for car ownership.
However, we can be very confident that Turo will be looking at a valuation far greater than $1 billion once it debuts on the NYSE.
