Peer to peer car sharing company Turo files Initial Public Offering (IPO) to go public
Peer-to-peer car-sharing company Turo files Initial Public Offering (IPO) to go public
The startup operates on a peer-to-peer basis and is focused on the car sharing market. Following a period of confidentiality, Turo has made its application to become a publicly traded company in the United States public. The process to become a publicly traded company began in August.
The terms of the offering are not included in the S-1 filing made on Monday with the Securities and Exchange Commission of the United States.
Owners of private automobiles can rent out their vehicles through Turo's website or mobile application, which was launched in 2010. Turo has been dubbed "the Airbnb of automobiles." Approximately 85,000 active hosts and 160,000 active vehicle listings were available in over 7,500 cities as of September 30, 2021 according to company statistics. Car owners benefit from the opportunity to reduce their ownership costs, while users benefit from the availability of low-cost short-term rentals at a time when rental car prices are rising as a result of supply chain issues caused by the pandemic in Africa. In spite of stiff competition, Turo's success has been aided by challenges in the traditional car rental industry. However, as a reading of the risk factors section of the S-1 demonstrates, this popularity has come at a cost at times.
A brief financial analysis
Let's start with a look at the financial situation
According to the S-1, Turo generated net revenue of $149.9 million in 2020, representing a 6 percent increase year over year. Net losses for the year 2020 totaled $97.1 million, a slight improvement over the net losses of $98.6 million for the year 2019.
Turo attributes its revenue growth to a number of factors, the most significant of which is a digital tool known as the Turo Risk Score. This feature, was made available in April 2020, automatically adjusts the fees charged by Turo to guests in order to complete a booking. Turo stated that the use of this tool, as well as increases in the prices that hosts charge guests for vehicles, contributed to the company's increased net revenue in the quarter.
In 2021, both sales and losses skyrocketed
A whopping 207 percent increase in net revenue from $107.8 million in the same period in 2020 was reported by Turo in the first nine months of 2021, bringing total revenue to $330.5 million. The company's net losses have also increased. According to Turo, the company lost $129.3 million in the nine months ended September 30, 2021, as opposed to $51.7 million in the same period in the previous year.
What is the reason for this? As stated in its S-1 filing, Turo's revenue increased in lockstep with the number of booked days and the gross booking value per day booked.
According to a scan of the S-1, Turo also appears to have attempted to do more with less in 2020, and has since reopened the financial faucet this year in order to do so. Compared to 2019, the company expects to reduce spending by $133.9 million in 2020, down from $133.9 million in 2019.
Contrast that with the first nine months of 2021, which paint a completely different picture. According to company financial statements, operating expenses totaled $124.01 million in the first nine months of the year, a significant increase from $71.6 million in the same period last year. Also reported by Turo is that the company earned $69.8 million in adjusted EBITDA — a modified profitability metric — in the first nine months of fiscal year 2020. Although the company suffered a net loss of $129 million as a result of a change in the fair value of redeemable convertible preferred stock warrant liability of $174.7 million, this was accomplished.
Risk factors
One of the most obvious risk factors for the company is "what if people stop using Turo" and "what if we face competition" from similar apps and traditional car rental companies, respectively. However, there are a few that stand out.
Turo, for example, has stated that the COVID-19 pandemic has increased the volatility of its business. It was necessary for the company to lay off employees and even close its German operations in 2020, only for the company's operations to revert to "pre-Covid levels" in the following year.
The car rental app warns that it may be held liable for the criminal acts of its hosts if they do not follow the rules. However, in August of last year, Turo and other peer-to-peer rental apps were discovered to have been used by criminals for human trafficking and other crimes, a trend that US Customs and Border Protection acknowledges is growing near the border. While there do not appear to be any lawsuits or fines at this time,
Turo is also liable for lawsuits brought against it by cities — specifically, airport authorities — for failing to comply with their requirements that the long-running startup obtain rental car permits. Turo has been sued and counter-sued in this area, and the outcome is unclear. There have been four lawsuits filed regarding airport use, and three of them, including one brought by Turo against the City of Los Angeles, have not been resolved yet.
Growth and Oppotunities
Turo estimates that its current serviceable addressable market is worth $146 billion and that its total addressable market is worth $230 billion, despite the fact that there are risks involved.
We believe we have a medium- to long-term opportunity to onboard hosts in selected countries around the world," according to the filing. "We estimate our $230 billion TAM to be $134 billion in North America, $65 billion in Europe, and $31 billion in the rest of the world."
Particularly notable is that the company appears to be willing to expand both domestically and internationally. Also prepared to make strategic acquisitions and partnerships, the company says, "in order to provide our hosts and guests with services and features that we do not currently offer."
