Online used car seller Vroom raises $467.5 million in upsized US IPO

Vroom priced its IPO at $22, above the initially marketed range of $18 to $20.

Online used car seller Vroom Inc raised $467.5 million in its U.S. initial public offering, the company said on Monday, as the IPO market picks up momentum after the COVID-19 pandemic placed many debuts on hold.

Vroom priced its IPO at $22, above the initially marketed range of $18 to $20, valuing the company, which is backed by funds such as T Rowe Price Associates and L Catterton, at $2.48 billion. The company sold 21.25 million shares compared with the earlier plan of 18.8 million shares.

Recent recovery in the U.S. stock markets has led to a flurry of IPO-hopefuls entering the race. Royalty Pharma, which buys biopharmaceutical royalties, unveiled plans on Monday to raise up to $1.96 billion in an IPO.

Vroom, which had filed for an IPO last month, reported a more than twofold rise in sales at its e-commerce business in the first quarter of 2020 as the virus outbreak and stay-at-home orders stoked a surge in online shopping.

The company, which use digital tools to close deals and home delivers vehicles to customers, said revenue for the first quarter ended March 31 jumped 60% from a year earlier, and net loss attributable to Vroom's common stockholders narrowed to nearly $41.1 million from $45.1 million.

Rival Carvana Co, which saw its stock plunge nearly 80% in a month, has recovered dramatically to be up 26% on-year as online car selling gains favor in the post-pandemic world.

App boom: Why 2019 could be the year of another technology bubble crash

It is only a matter of time before the app bubble bursts. Falling shares of the big tech companies is indicative of markets losing faith in even the established tech corps to achieve their forecasts.

When the dot-com bubble burst in 2000 it sent significant numbers of businesses to the wall. Investment banks had been encouraging enormous investment in dot-com ventures by launching Initial Public Offers (IPOs) allowing investors and entrepreneurs to cash in on vast fortunes by selling off shares in their companies.

Most of the dot-coms which listed on stock exchanges had done little more than consume vast amounts of investor cash and showed little prospect of achieving a profit. Traditional metrics of performance were overlooked and big spending was seen as a sign of rapid progress.

The cash burn was to build branding and create network effects – where something gains more value the more people use it. These are the main driver of platform businesses. With Amazon, for example, the more suppliers the greater benefit to potential customers and vice versa. Together, this would build the foundation for future profits on the assumption that the underlying business case was sound. Most were not – and yet almost any idea attracted large amounts of funding.

Fast forward 19 years and, following a similar “app” boom, investment banks are bringing forward IPOs as they foresee volatile market conditions arriving later in the year. Ride-hailing apps Uber and Lyft, respectively valued by investment banks at US$120 billion and US$15 billion, are to be placed in early 2019 to beat the collapse. Both are loss makers – with Uber’s losses approaching US$4 billion in 2018 after a US$4.5 billion loss in 2017. Traditional metrics have been ignored and user growth taken as a proxy for future profitability. But this requires an enormous leap of faith.

The NASDAQ Composite index from 1994 to 2005, showing the peak in early 2000 that coincides with the dot-com bust. Lalala666 via Wikimedia Commons

Uber, like many, has been able to tap readily available funds and has raised more than US$22 billion from investors so far. The problem with being able to raise funds so readily is that it discourages focus and efficiency. Uber is not only developing the ride hailing model but also bike sharing, takeaway food delivery and autonomous vehicles. The latter is also being developed by most of the major car manufacturers, as well as Google.

Snap Inc, owner of social media app Snapchat, is also on the rocks, as it is rapidly running out of funds – despite its US$24 billion listing in 2017. The shareholders are powerless to intervene, as only founder shares have voting rights. LinkedIn is still losing money after its US$26 billion purchase by Microsoft.

Twitter has just made a small profit for the first time, following adoption as US president Donald Trump’s main channel for US policy announcements.

Business Standard

Nykaa set to launch IPO in two years, bring about 20 brands this year: CEO

The company, which at present has 22 outlets across the country, is looking at opening 180-200 Nykaa stores in the next 4-5 years.

Beauty brands retailer Nykaa is looking at going public in two years and has begun preparations for its initial public offering (IPO), a top company official said.

The company is also looking to double its revenue to around Rs 11 billion by 2018-19 end as it is bringing in new brands.

"We are already on a path to prepare for an IPO. Before IPO... you need to be formally run and follow a bunch of processes. We also have appointed KPMG as our internal auditor. It (IPO) will happen by calendar 2020," Falguni Nayar, the founder and CEO of Nykaa told PTI.

Nayar is a former investment banker and used to specialise in IPOs.

The company, which at present has 22 outlets across the country, is looking at opening 180-200 Nykaa stores in the next 4-5 years.

"We have a want and dominant footprint to be relevant in the beauty and makeup space. We have set a target of growing by 100 per cent our revenue to about Rs 11 billion in the current financial year," she said.

ALSO READ: Now, buy Nykaa's beauty products while watching its make-up videos

Nykaa reported a revenue of Rs 5.7 billion in 2017-18.

At present, physical stores contribute under 10 per cent to the online beauty retailer's revenue.

When asked if the company is looking raising funds to support its expansion plans, Nayar said, "We may look at raising funds. But it will not be a lot."

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