Turo's IPO Accelerating Towards Launch

Tech investors who are looking to explore a new lane of the ride-share market will have to be a little patient. However, they will eventually get their chance.

It's been nearly a year since car-sharing platform Turo filed for its initial public offering (IPO), but the company has yet to pull the trigger on the actual listing. Given the recent performance of its competitor Getaround, it's understandable why Turo might be hesitant. Getaround has lost more than 90% of its value since closing its merger with special-purpose acquisition company InterPrivate II Acquisition Corp.

Earlier this month, the Nasdaq stock market index fell by 34%. This has been a difficult year for tech companies, with fellow firms like Instacart also delaying their highly anticipated public offerings.

Turo is doing well financially, growing faster than its competition. For the first nine months of this year, Turo’s revenue grew by 69%. This growth is likely to continue, as the company generates most of its revenue in the fourth quarter. Hosts (those renting out their vehicles on Turo’s platform) grew by 28% between the second and third quarters of this year, while guests (those paying to rent the vehicles) grew by 17% over that period.

The results of Turo's operations distinguish it materially from Getaround, which, according to a regulatory filing last month, saw its revenue fall by approximately 7% year-on-year through the first nine months of this year. If current trends continue, Getaround will lose over $130 million this year, while Turo will achieve its first ever year of net profits.

IAC Inc., which owns 27% of Turo with a warrant to purchase an additional 10%, recently released an analysis showing that investors are currently ascribing little to no value to its car-share holding. This is likely due to the fact that the entire tech sector has been written off by the market of late. Barry Diller's IAC invested $250 million in Turo back in 2019 to become its largest shareholder.

Turo had $300 million in cash and cash equivalents as of Sept. 30, which the company said is enough to fund its working capital needs for at least the next 12 months. But it probably won’t want to wait too much longer to go public if it wants to strike while its own iron is hot. The fact that the company continues to regularly update its S-1 financials suggests it still intends to flip soon. Turo may be outperforming its car-share rival, but its top-line growth is moderating relative to its Covid highs. Last year, Turo more than tripled its revenue from a year earlier to over $469 million.

Turo's current profits may not be sustainable in the long term. According to the company's updated S-1 filing, it does not expect to generate consistent net income going forward, as it plans to increase operating expenses significantly in order to drive growth.

If that is bad news for Turo's bottom line, it is even worse news for Getaround. Getaround is already spending a large percentage of its revenue on sales and marketing, but has little to show for it. Getaround says it has actually spent less than anticipated on sales and marketing this year, due to its SPAC merger closing later than expected.

Investing in ride-sharing companies is going to be more exciting next year. Just be careful which company you invest in.