Brief TMT & Internet: Lyft IPO: Key Takeaways from In-Depth Interviews with Drivers and more

In this briefing:

  1. Lyft IPO: Key Takeaways from In-Depth Interviews with Drivers
  2. Wisetech Global Placement – Past Deal Did Well but Valuations Looks Stretched
  3. Hyundai Autoever IPO Bookbuilding: Surprising Results, Local Street Bets on Autoever/Glovis Merger
  4. Mindtree (MTCL IN): L&T’s Hostile Takeover Offer Is an Awkward Opening Gambit

1. Lyft IPO: Key Takeaways from In-Depth Interviews with Drivers

Lyft sales

  • In-depth interviews with two full-time drivers reveal that Lyft Inc (0812823D US) has disrupted the incumbent Yellow Cab in NY City due to better take-home income economics for drivers.
  • Bargaining and pricing power favor LYFT (vs. drivers) as LYFT could provide the volume (sufficient number of rides per day) for drivers.
  • LYFT’s path to profitability depends on 1) the further scale-up of network effect 2) diversification of transportation-related business and 3) progress in autonomous cars’ unit cost economics.
  • Given its track record as a disruptive force, investors could be willing to pay up (over 5.0x P/S multiple) for LYFT, making the IPO a hot deal.

2. Wisetech Global Placement – Past Deal Did Well but Valuations Looks Stretched

Screen%20shot%202019 03 19%20at%208.57.57%20am

Wisetech Global (WTC AU) plans to raise US$177m/AUD250m in order to shore-up its balancesheet for future acquistiions. 

The company has done exceedingly well since listing and even its past fund raising delivered good returns. However, the deal scores a mixed score on our framework as valuations appear strecthed with the stock trading above analysts target price. Thus, the deal might warrant a large discount.

3. Hyundai Autoever IPO Bookbuilding: Surprising Results, Local Street Bets on Autoever/Glovis Merger

5

  • Subscription rate is 797 to 1. Offer price was fixed at ₩48,000, substantially higher than the upper end. Deal size is now ₩168.5bil. Company value is put at slightly higher than ₩1tril. Demands are spread out pretty well between long-term funds and hot money and local and foreign investors as well. All of the orders are universally placed at 75% of upper end or higher.
  • Local street is betting on Autoever/Glovis merger not long after this IPO. That is, HMG is still wanting the initial Glovis/Mobis merger plan. To better manage to win shareholder support, they must be thinking that bigger Glovis can be an answer. This means HMG should do whatever it takes to make Autoever bigger in the immediate future.
  • This is what local street is betting on and why they went really aggressive on this IPO. As witnessed in the bookbuilding results, this street mentalitywon’t be changed any time soon. We should expect even stronger prices after new shares are listed on Mar 28.

4. Mindtree (MTCL IN): L&T’s Hostile Takeover Offer Is an Awkward Opening Gambit

Late Monday evening, Larsen & Toubro (LT IN) launched India’s first ever hostile takeover in the tech sector. L&T is seeking to acquire a 20.3-66.3% stake in Mindtree Ltd (MTCL IN) through a three-step transaction. Mindtree’s founders/promoters together have a 13.3% stake and staunchly oppose the takeover. L&T’s open offer presents an opportunity for longstanding large shareholders to partially or fully exit their stakes at a reasonable price.

L&T’s open offer is less enticing for minority shareholders due to the small premium. Minority shareholders hope that a bidding battle will drive up bid premiums. However, we believe that minority shareholders should stick with their holdings as Mindtree’s fundamentals remain solid, but a chance of a material bump to L&T’s open offer is low.

Get Straight to the Source on Smartkarma

Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.