Valuing IOU
Some musings...
There are 3 basic ways to value a tech company / or to reconcile the MC:
1) multiple of profit
2) multiple of revenue / transaction value
3) multiple of customers / merchants
These can be combined - and will justify a higher multiple if those metrics are accelerating - ie going parabolic
The BNPL market can't be measured on profit - because they are mostly making big losses - APT's losses are huge
The case for having no profits but still justifying a big MC is based on 'land grabbing' - so the cost curve sits ahead of the income curve - helping to drive rapid expansion.
Companies usually have to choose between profits and rapid growth - you normally can't have both!
But you still need some tie-back to MC.
In the case of APT - how to justify their $40 billion valuation?
Here are the key APT stats:
• active customers 16 million
• active merchants 100,000
• underlying sales $20 billion
• annual income $910 million
• annual loss $194 million
If we use a revenue multiple then APT's multiple is over x40
Annual IOU revenue:
• inventory $8 mill
• IDSB $40 mill
• BNPL $20 mill
Total = $68 mill
@ x 40 suggests a MC of $2.7 billion
Current MC = $154 mill
Which implies a revenue multiple of x2
And IOU is borderline profitable!
Hmmmmm....
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