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📮The Sunday Newsletter archive

The IPO market is roaring back to life

Hello everyone👋,

Happy Sunday,


After a short and IPOless week, get ready for some interesting debuts next week. Today we’ll unpack 2 promising upcoming IPOs and give an update on Marqeta ($MQ) which is going public on Wednesday. We discussed Marqeta in detail in the previous SN.📩

This is the 4th newsletter of the week. In the other three issues, we analyzed SoFi ($SOFI) a fintech behemoth in the making that’s now a public company and explained what’s going wrong with C3.ai ($AI) as shares refuse to rebound. We also discussed a stock to avoid, a Shopify ($SHOP) copycat with a bubblicious valuation but no competitive advantage.

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Here’s next week’s most anticipated debuts.

Bringing the Paris flea market online

1stDibs ($DIBS) is an online marketplace for luxury products 💎 such as designer furniture, jewelry, paintings and other luxury goods. The company connects sellers with buyers around the world, and while it doesn’t hold inventory, it does handle the shipping of items sold on the marketplace. In 2020 it had more than 58,000 buyers spending an average of $5,500 a year on the platform. DIBS makes money from transaction fees and subscriptions from sellers to access the marketplace.

The company is not profitable yet but is growing fast and its metrics are moving in the right direction. In 2020 revenue grew 16% y/y to $81.8 million, but in Q1 2021 growth accelerated to 43% y/y. The operating margin has also improved significantly from -44% in 2019 to -9% in the first quarter of the year. In terms of cash flow, the company reported a positive operating cash flow of $6.1 million in Q1. If Dibs continues on its current growth trajectory, we’ll see profits soon.

Commentary: The market for unique luxury design products has historically been highly fragmented and localized. DIBS allows sellers to access a global base of HNWI (High Net Worth Individuals) creating growth opportunities for them. On the customer side, DIBS gives buyers access to a global supply of luxury products they couldn’t otherwise find.

The global market for luxury goods fell by 20% to 25% in 2020, yet DIBS managed to grow revenues by 17% that year. This shows that the company is gaining market share 🧲 due to network effect of the platform.

DIBS plans to sell 5.75 million shares at a midpoint price of $19.50 each, for gross proceeds of about $112 million. At this price, its market value will approximate $700 million with a P/S ratio of around 8x. Compared to Farfetch’s ($FTCH) 9.2x sales multiple, DIBS’s multiple is reasonable as is in line with the firm’s somewhat lower growth — FTCH reported revenue growth of 55.1% in Q1 2021 while DIBS reported a growth 43%. Shares start trading on Thursday.

The card issuing firm for startups
Marqeta founder Jason Gardner
Marqeta founder Jason Gardner

Marqeta ($MQ) is a card issuing company that works with high profile companies such as Uber ($UBER), Doordash ($DASH), or fintech companies such as Square ($SQ). Compared to legacy firms, Marqeta makes the card-issuing process fast and fully customizable to a company’s specific needs, thanks to its open API.

In its updated prospectus, it set its price range between $20 and $24 per share. At the midpoint price of $22, its market value will approximate $11.66 billion, or about 35% lower than its latest private valuation 😬. At $22 its P/S ratio will be 40x which is definitely expensive, but keep in mind that Marqeta doubled its revenues in 2020 and accelerated its growth in Q1, so this multiple can be justified. Shares start trading on Wednesday. Check out the previous SN that was focused exclusively on Marqeta.


It’s Monday(.com)
Kim Kardashian crying meme

Monday.com ($MNDY) is a software firm that has built what it calls the “WorkOS”. It’s a platform on which companies can build their own collaboration and project management tools, according to their own needs. It makes money via subscriptions and already counts some of the largest companies in the world, such as Adobe ($ADBE), or Coca-Cola ($KO) 🥤 as customers.

As an online collab tool, it got a huge boost from the pandemic. Revenue jumped 110% in 2020 to $138.6 million but that’s also due to its crazy marketing spending. Sales and marketing costs were 119% of total revenues last year. This is the main reason why the company is still deeply unprofitable. In 2020, it reported an operating margin of -93% but in Q1 2021 it improved to -64%. It’s still deep in the red, but it’s moving in the right direction which is encouraging.

Commentary: The market for online collaboration tools is expected to grow a lot in the future as companies digitize their operations and more people work remotely, so they need tools to help them stay productive.

The biggest risk for MNDY is the stiff competition in the space with many other public and private startups offering similar services. See Asana ($ASAN), Smartsheet ($SMAR), and private firms like Notion (which is my favorite and rumors say that’s already profitable).

The company has priced its IPO at an unusually high midpoint price of $132.50 per share, which translates into a market cap of $5.8 billion and a P/S ratio of 30. It’s a reasonable multiple for its growth rate and is in line with Asana’s P/S ratio, despite growing faster– Asana reported Q1 revenue growth of 61%, while MNDY reported growth of 85% over the same period. Shares start trading on Thursday.


Ranking next week’s IPOs:
🥇MQ
🥈MNDY
🥉DIBS

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