IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/cartrade-tech-ltd" target="_blank" data-smartkarma-citation="entities:33474:1" rel="noopener">Cartrade (0056989Z IN)</a> is a leading online destination for auto consumers in India. <em>CarWale</em> and <em>BikeWale</em>, key brands owned by CarTrade, ranked number one on relative online search popularity when compared to their key competitors over the last three years, according to Google Trends data. CarTrade’s shareholders include Warburg Pincus (34.44% of fully diluted shares), Temasek (26.48%), JP Morgan (11.93%) and March Capital (7.09%). </p><p>CarTrade is looking to raise Rs28 billion ($375 million) through an IPO in India, according to press reports. The IPO comprises a pure offer for sale of 18.53 million shares by its existing shareholders and promoters. The IPO is set to launch on 9 August.  </p><p>India was the fifth largest car market in the world in 2019 and is forecasted to become the third-largest auto market in the world as measured by volume in 2025, according to RedSeer. The COVID-19 pandemic has also resulted in a shift in preference towards used cars as people limit their use of public transportation. Indian auto OEMs spent only 14% of their total ad budgets on digital advertising, which is significantly lower than the global average of 42% in 2020, according to RedSeer. </p><div class="content-highlight"><p>The growing auto market combined with the rising penetration of digital ad spend presents an attractive opportunity for auto transaction platforms such as CarTrade. CarTrade is capitalising on this market opportunity as evidenced by its highly popular platforms, solid organic growth, strong margins and healthy cash generation. Overall, we think that CarTrade is an attractive play on India’s new economy sector.</p></div>

Cartrade (0056989Z IN) is a leading online destination for auto consumers in India. CarWale and BikeWale, key brands owned by CarTrade, ranked number one on relative online search popularity when compared to their key competitors over the last three years, according to Google Trends data. CarTrade’s shareholders include Warburg Pincus (34.44% of fully diluted shares), Temasek (26.48%), JP Morgan (11.93%) and March Capital (7.09%). CarTrade is looking to raise Rs28 billion ($375 million) through an IPO in India, according to press reports. The IPO comprises a pure offer for sale of 18.53 million shares by its existing shareholders and promoters. The IPO is set to launch on 9 August.  India was the fifth largest car market in the world in 2019 and is forecasted to become the third-largest auto market in the world as measured by volume in 2025, according to RedSeer. The COVID-19 pandemic has also resulted in a shift in preference towards used cars as people limit their use of public transportation. Indian auto OEMs spent only 14% of their total ad budgets on digital advertising, which is significantly lower than the global average of 42% in 2020, according to RedSeer. The growing auto market combined with the rising penetration of digital ad spend presents an attractive opportunity for auto transaction platforms such as CarTrade. CarTrade is capitalising on this market opportunity as evidenced by its highly popular platforms, solid organic growth, strong margins and healthy cash generation. Overall, we think that CarTrade is an attractive play on India’s new economy sector.

CarTrade Tech IPO Initiation: Shifting Gears

TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

Equity Bottom-Up

<p>We have always enjoyed following IAC because we share a worldview with management about investing behind THE major secular trend in the world today…offline to online transition of massive TAMs. Even the largest TAMs in the world – groceries, entertainment, autos, commerce, finance, real estate, etc. are still incredibly early in the long term replatforming of how the global economy functions.</p><p>COVID has turbocharged these trends, which may be why we’ve seen such massive outperformance by the stocks at the forefront of these trends.</p><div><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

We have always enjoyed following IAC because we share a worldview with management about investing behind THE major secular trend in the world today…offline to online transition of massive TAMs. Even the largest TAMs in the world – groceries, entertainment, autos, commerce, finance, real estate, etc. are still incredibly early in the long term replatforming of how the global economy functions.COVID has turbocharged these trends, which may be why we’ve seen such massive outperformance by the stocks at the forefront of these trends.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<ul>
<li>The bankers announced the IPO price range of $15 to $17 per share for <a href="https://www.smartkarma.com/entities/vroom" target="_blank" data-smartkarma-citation="entities:28967:1" rel="noopener">Vroom (VRM US)</a>, a leading e-commerce company in the U.S. that provides a platform for buying and selling used vehicles.</li>
<li>
<strong>Our base case valuation of Vroom is a market cap of $3.2 billion or $27.30 </strong><strong>per share, which would represent a 60% upside from the high end of the IPO price range of $17 per share. Given the high upside, we have a positive view of this IPO. </strong>
</li>
<li>In the midst of the COVID-19 pandemic, Carvana and Vroom's core business model of<em> "non-contact"</em> sales of used vehicles is definitely an advantage as millions of customers shy away from physically going to the auto dealers to buy their cars. In addition, millions of U.S. consumers need to become more frugal and buying used goods (such as cars) will be in higher demand, especially from the consumers that want to buy quality vehicles but willing to sacrifice buying new cars due to the need to save money. These trends are clear tailwinds for Vroom's business. </li>
</ul>


The bankers announced the IPO price range of $15 to $17 per share for Vroom (VRM US), a leading e-commerce company in the U.S. that provides a platform for buying and selling used vehicles.

Our base case valuation of Vroom is a market cap of $3.2 billion or $27.30 per share, which would represent a 60% upside from the high end of the IPO price range of $17 per share. Given the high upside, we have a positive view of this IPO. 

In the midst of the COVID-19 pandemic, Carvana and Vroom's core business model of "non-contact" sales of used vehicles is definitely an advantage as millions of customers shy away from physically going to the auto dealers to buy their cars. In addition, millions of U.S. consumers need to become more frugal and buying used goods (such as cars) will be in higher demand, especially from the consumers that want to buy quality vehicles but willing to sacrifice buying new cars due to the need to save money. These trends are clear tailwinds for Vroom's business. 


<div class="content-highlight">
<p><a href="https://www.smartkarma.com/entities/vroom" target="_blank" data-smartkarma-citation="entities:28967" rel="noopener">Vroom (VRM US)</a> , a leading e-commerce company in the U.S. that provides a platform for buying and selling used vehicles, is getting ready to complete an IPO on the NASDAQ market in the next few weeks. Vroom sells used vehicles with no price haggling. The company offers financing from more than 12 banks and delivers cars to customers nationwide. There is a seven-day money-back guarantee on purchases and a 90-day bumper-to-bumper warranty.</p>
<p>Founded and based in New York in 2013, Vroom sells refurbished, low-mileage used cars to consumers with free delivery. The company has a $100 million IPO placeholder but that could be raised depending upon demand. </p>
</div>
<p>There is likely to be a healthy demand for this Vroom IPO since one of its key competitors called <a href="https://www.smartkarma.com/entities/carvana-co" target="_blank" data-smartkarma-citation="entities:26471:1" rel="noopener">Carvana Co (CVNA US)</a> has seen its share price surge more than 5x since its IPO in 2017. Plus, this used vehicle sales through ecommerce is in a sweet spot with the ongoing COVID-19 pandemic as the U.S. consumers are reluctant to physically check out used car dealerships but may be more willing to try out ecommerce used vehicle websites such as Vroom and make purchases through this ecommerce platform. </p>


Vroom (VRM US) , a leading e-commerce company in the U.S. that provides a platform for buying and selling used vehicles, is getting ready to complete an IPO on the NASDAQ market in the next few weeks. Vroom sells used vehicles with no price haggling. The company offers financing from more than 12 banks and delivers cars to customers nationwide. There is a seven-day money-back guarantee on purchases and a 90-day bumper-to-bumper warranty.
Founded and based in New York in 2013, Vroom sells refurbished, low-mileage used cars to consumers with free delivery. The company has a $100 million IPO placeholder but that could be raised depending upon demand. 

There is likely to be a healthy demand for this Vroom IPO since one of its key competitors called Carvana Co (CVNA US) has seen its share price surge more than 5x since its IPO in 2017. Plus, this used vehicle sales through ecommerce is in a sweet spot with the ongoing COVID-19 pandemic as the U.S. consumers are reluctant to physically check out used car dealerships but may be more willing to try out ecommerce used vehicle websites such as Vroom and make purchases through this ecommerce platform. 

<div><p>In the past few days, IAC, ANGI, and MTCH all reported earnings. The main takeaway? Their businesses are seeing an acceleration in the LT secular shift of transactions moving online – be it house repair or dating. That’s good. Two key points that make IAC and its offspring well positioned to weather the storm and come out stronger on the other side:</p></div><div><ol>
<li>Very low fixed cost bases. IAC and ANGI are ~80% variable cost businesses and Match is 63%. This gives them great flexibility to protect their employee base…and more importantly gives them the opportunity to not change their cost structure, but get more bang for their buck….</li>
<li>….because IAC’s customer acquisition costs have gone waaaay down as travel and retail – the verticals it has to bid against for TV ads and search traffic – are out of the market. This is enabling them to  stepg on the accelerator to scale up platform liquidity. We think this is very smart.</li>
</ol></div><div><p>For this reason and ones we will touch on below – we no longer think Match is a short. We would think of this more as a long as the spin approaches, arbs exit the trade, and long onlys can engage more fully. We will revisit this as we get closer to the spin.</p></div><div><div><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div></div></div>

In the past few days, IAC, ANGI, and MTCH all reported earnings. The main takeaway? Their businesses are seeing an acceleration in the LT secular shift of transactions moving online – be it house repair or dating. That’s good. Two key points that make IAC and its offspring well positioned to weather the storm and come out stronger on the other side:
Very low fixed cost bases. IAC and ANGI are ~80% variable cost businesses and Match is 63%. This gives them great flexibility to protect their employee base…and more importantly gives them the opportunity to not change their cost structure, but get more bang for their buck….
….because IAC’s customer acquisition costs have gone waaaay down as travel and retail – the verticals it has to bid against for TV ads and search traffic – are out of the market. This is enabling them to  stepg on the accelerator to scale up platform liquidity. We think this is very smart.
For this reason and ones we will touch on below – we no longer think Match is a short. We would think of this more as a long as the spin approaches, arbs exit the trade, and long onlys can engage more fully. We will revisit this as we get closer to the spin.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

United States

Carvana Co. operates an online platform for buying used cars. The Company offers test drives, vehicle financing, and car reviews. Carvana serves customers in the United States.

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Carvana (CVNA US)

CarTrade Tech IPO Initiation: Shifting Gears

CarTrade is looking to raise Rs28 billion ($375 million) through an IPO in India. Overall, we think that CarTrade is an attractive play on India’s...

Arun George

IAC / ANGI 2Q20: Doubling Down

We have always enjoyed following IAC because we share a worldview with management about investing behind THE major secular trend in the world...

Aaron Gabin

Vroom IPO Valuation Analysis

The bankers announced the IPO price range of $15 to $17 per share for Vroom (VRM US), a leading e-commerce company in the U.S. that provides a...

Douglas Kim

Vroom IPO Preview

Vroom (VRM US) , a leading e-commerce company in the U.S. that provides a platform for buying and selling used vehicles, is getting ready to...

Douglas Kim

ANGI: Surprisingly Resilient

In the past few days, IAC, ANGI, and MTCH all reported earnings. The main takeaway? Their businesses are seeing an acceleration in the LT secular...

Aaron Gabin

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