air taxi public financing dubai2008
DESCRIPTION
This presentation is an update on financing Air Taxi companies in the public markets. It was given in March of 2008 while the markets were weak but still working. It covers the dynamics at that time. Since then several of the companies have had more trouble or gone out of business. Public markets have been closed.TRANSCRIPT
On-Demand Air Travel
Financing in the Public Markets
Dubai - March 10, 2008
Very Light Jets – Middle East Dubai, UAE March 10, 2008
Kris Tuttle, Director of Research
Discussion Points • Current financing market: Workable
• Status of a semi-developed public market: Patchy
• A litmus test: POGO
• Public market status: Still uncertain
• Reasons to care: WACC, ROIC, LTV, etc.
• Outside the box: OpenIPO, Global Exchanges, Celtics
Dubai - March 10, 2008
Background
• Emerging technologies since 1979 – Pre-commercial microcomputers, Carnegie-Mellon – IBM Strategy, Development, Marketing and Sales
• In financing such since 1992 – Active investor, NYU Stern School – UBS, SoundView, Adams
• Research 2.0 launched in 2005 (Software) • Air 2.0 practice launched in 2007
– Interest, Contacts, Timing, Resources
• Retained to provide related research on POGO IPO
Dubai - March 10, 2008
Private Market Pockets • Financing is still largely hand to hand combat • Market leaders like DayJet and Eclipse are okay • Second tier companies also fundable but…
– Largely private investors willing to commit to long durations – Fairly small in size: One to ten million per investor – Lots of companies go begging: Actually good news.
• Related company private financing – Kayak.com $196M – Zipcar raised $100M in equity financing to 2006 and now doing
asset-backed and using cash flow (GE).
Dubai - March 10, 2008
A Patchy Public Market
• Today the market for travel-related companies is mixed.
• “Upstart” airlines haven’t done very well.
• Online travel services have fared better.
• Niche software and service providers are embraced.
Dubai - March 10, 2008
Ryanair
Dubai - March 10, 2008
Frontier Airlines
Dubai - March 10, 2008
Southwest Airlines
Dubai - March 10, 2008
JetBlue
Dubai - March 10, 2008
Expedia
Dubai - March 10, 2008
Ctrip.com
Dubai - March 10, 2008
Blackboard
Dubai - March 10, 2008
POGO IPO
• Filed for 7M shares at $14.50 (mid-point) for $101M • Implied valuation of about $153M • Few minor details:
– No current assets, no existing operations • But:
– Strong management team – Solid market potential & business plan
• Marketing now, closing expected week of March 18
Dubai - March 10, 2008
Northeast U.S. Market
Dubai - March 10, 2008
2009 2010 2011 2012 2013 2014 2015
Trip Demand (000) 337 345 354 363 372 381 390
Share 1% 7% 20% 25% 30% 35% 40%
Trips (000) 3.4 24 71 91 111 134 156
Passenger Hrs. (000) 4.2 32 103 136 167 200 234
Revenue (M) $9M $68M $216M $286M $352M $421M $492M
Trips/Day/Plane 1.0 1.7 2.0 2.2 2.4 2.6 2.8
Planes Required 11 46 118 138 155 171 186
Rev/Plane (000) $787 $1,488 $1,827 $2,079 $2,268 $2,457 $2,646
@10% Net $1M $7M $21M $29M $35M $42M $49M
@15% Net $1.4M $10.3M $32M $43M $53M $63M $74M
[$2100/hr, 1.25 to 1.5 hr trip, 300 day year]
Investor Feedback • What about the Eclipse?
• How will the company differentiate itself?
• Is this the right business model?
• No real push back (yet) on: – Market potential – Financial model
Dubai - March 10, 2008
OpenIPO
• Traditional IPO capital markets are a deep mystery • Dutch auction
– All investors bid what they want to pay – Offer pricing and allocations set objectively
• Market is developing – Google, Morningstar, NetSuite
• Disruptive model still in early stages
Dubai - March 10, 2008
Potentially Low WACC
Dubai - March 10, 2008
We say $12…
… the market says $26.
(We still say $12.)
Thinking Outside the Box
• Creative Finance • OpenIPO • Could “affinity” equity work? The Celtics • Other Exchanges
– London, Dubai
Dubai - March 10, 2008
Dubai - March 10, 2008
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Questions and requests just contact me at [email protected].
Research 2.0
• We offer research and advisory services to company managements, investors and investment banks.
• Offices in Paris, Boston and New York
• Lightweight, on-demand business model • Strong network of resources on staff and via contract • Our approach is honest, independent and unstuffy
Going Public Workshop
• The foundation • POGO example (roadshow and support) • Investment banks and research • Creating financing
– OpenIPO – Loyalty programs? – Assets and alternative structures
• Other exchanges: London, Dubai
Dubai - March 10, 2008
The Foundation
• The basic stuff – Management – Business Process – Financial Controls
• Secret Sauce • Effective marketing • Strong operations planning/execution • Regulatory and governmental support
Dubai - March 10, 2008