After a modest start to the year, the initial public offering (IPO) market is witnessing a surge in activity, particularly driven by technology and healthcare companies. StubHub Holdings, a leading online ticket marketplace for entertainment events ranging from sports to concerts, has recently filed to become a public entity. The company has applied to list its shares on the New York Stock Exchange under the symbol STUB. However, details such as the number of shares being offered and the offer price are yet to be disclosed.
The group of underwriters for this offering is led by J.P. Morgan and Goldman Sachs. StubHub's management plans to use the proceeds from the offering primarily to repay debt and for general corporate purposes, including working capital, operating expenses, and capital expenditures.
StubHub's revenue performance has been impressive over the past two years. In fiscal 2024, revenues increased by 30% year-over-year to $1.77 billion. Despite this strong topline growth, the company reported a net loss of $55.1 million, or $0.91 per share, attributable to common stockholders, compared to a profit of $351.5 million, or $5.71 per share, in fiscal 2023. The net cash provided by operating activities for the year was $261.5 million.
Founded in 2000 by Eric Baker, who currently serves as the chief executive officer, StubHub was the first online marketplace for secondary tickets. The company was acquired by eBay in 2007, before Baker reacquired the business through his new company, Viagogo. StubHub's global presence provides it with leading distribution capabilities and a wide reach among fans around the world.
In its SEC filing, the company stated that it expects a significant opportunity to leverage its data and technology to create a comprehensive platform for all event-related content. However, StubHub's business remains vulnerable to factors affecting the live events market, such as the pandemic that previously brought the entire industry to a standstill.
StubHub's IPO announcement comes amidst a challenging environment for ticket sales. The company is trying to establish itself as a viable alternative to the dominant Live Nation Entertainment, which has faced scrutiny from regulators. The Department of Justice (DOJ) sued Live Nation for anticompetitive behavior last year, seeking to break up the company's stronghold on primary ticket sales.
Eric Baker, frustrated by the high costs associated with attending events like Broadway’s The Lion King, co-founded StubHub with a Stanford Business School classmate. Since its inception, the company has changed hands multiple times. eBay purchased StubHub for $310 million in 2007, but after pressure from hedge fund Elliott Management, the auction site was urged to divest assets. Baker’s new venture, European rival Viagogo, paid $4 billion for StubHub just as the COVID-19 pandemic shuttered events globally.
Despite these challenges, there are bright spots for StubHub. The company generated more than $550 million of free cash over the past two years, although it reported a net loss of $2.8 million in 2024 on $1.8 billion of revenue, a stark contrast to the profit of over $400 million recorded in 2023. Notably, Taylor Swift’s “Eras” tour accounted for a third of StubHub's gross ticket sales growth last year.
Valuation comparisons with other companies in the sector reveal a mixed outlook. StubHub's enterprise is estimated to be worth about $6 billion based on an average of 20 times 2024 EBITDA, according to Visible Alpha. However, after accounting for $1.3 billion of net debt, the equity would be valued at just $5 billion, significantly lower than the $16.5 billion sought during its last private funding round in 2021.
To achieve a valuation similar to its last private estimate, StubHub would need to command a multiple of 55 times, a feat that appears unlikely in the current market. Factors such as President Donald Trump's recent executive order targeting ticket scalpers and secondary markets may further complicate the landscape for StubHub and its IPO ambitions.
As consumers grow increasingly anxious about the economy, they may begin to forgo discretionary spending on entertainment, which could impact ticket sales. Airlines are already bracing for less travel, which could further dampen demand for live events. Moreover, recent stock issues have struggled to gain traction with investors, raising questions about the timing of StubHub's IPO.
In summary, while StubHub is poised to make its public debut, the road ahead is fraught with challenges. The company’s ability to navigate the complexities of the live events market and leverage its technology will be crucial as it seeks to establish a foothold amid growing competition and economic uncertainty.
