Car-sharing site Turo becomes first major IPO filing for 2022 following a record year for new stock issues

The San Francisco–based Turo maintains a platform through which over 85,000 car owners rent out some 160,000 vehicles across the United States, Canada, and the U.K. More than 1.3 million users booked over 7.4 million days over the nine months through September, making it the world’s largest car-sharing marketplace according to its own estimates.

Vehicles tend to spend on average 95% of the day idle, an underutilized yet expensive and depreciating asset for many cash-strapped car buyers. New software-based services offered by the likes of Uber, Lyft, and Turo are paving a trend toward user access to mobility at the expense of traditional car ownership.  

In a regulatory filing late on Monday, Turo argued transportation is ripe for disruption. More drivers are tempted to “forgo car ownership completely” in today’s age, the company said, while other enterprising car owners can earn a living or supplement their income by stepping into the void left behind. 

“We believe there are several seismic shifts in consumer behavior underway that are fueling our long-term opportunity,” Turo said in an S-1 form submitted to the U.S. Securities and Exchange Commission. 

The company aims to secure a greater slice of U.S. spending on mobility, which is estimated to be about $11,000 per household annually, according to estimates from the Bureau of Labor Statistics that Turo cited in its filing.

Pandemic setback

In addition to bringing transparency, efficiency, and liquidity to the short-term rental market, Turo argues its hosts can earn a little on the side or even go into business for themselves with the help of its platform. 

Assuming they offer up vehicles valued between $25,000 and $35,000, Turo says the typical U.S. car owner can earn $10,516 on average annually with just one car. That spare income can soar to $94,642 if they operate a fleet of nine.

The platform has suffered setbacks owing to the pandemic, however, most notably in Germany. After just over two years in the market, Turo CEO Andre Haddad wrote to users in Europe’s largest economy noting that he had decided to close the platform’s private car-sharing service down effective April 2020 in order to stem a tide of red ink.  

While it swung to an underlying profit (adjusted Ebitda) of $70 million in the first nine months of last year, its net loss during the period ballooned to $129 million, up from a comparable $52 million. That’s a hefty financial hole given its revenue only amounted to some $331 million. That top-line figure did, however, more than triple compared with the previous period in 2020.

Rather than list on the tech-heavy Nasdaq chosen by electric-vehicle maker Rivian for its blockbuster $13.7 billion IPO in November, the car-sharing platform plans to list under the ticker symbol TURO on the New York Stock Exchange with Wall Street banks Morgan Stanley and J.P. Morgan underwriting the sale.

Windows can close fast

According to EY consultancy firm, 2021 was a banner year for new stock issues, with 416 firms listing via an IPO and raising close to $156 billion. This represented an increase of over 80% in both cases and the best performance in the past 21 years. 

At the top of the list was Amazon-backed Rivian, maker of the award-winning R1T electric pickup truck, but other well-known names also floated on the market, such as meme “stonks” trading app Robinhood, dating site Bumble, and nondairy milk producer Oatly. (Crypto exchange platform Coinbase also went public but chose a direct listing rather than a classical IPO.)

Yet a large number of these companies have performed far below expectations. For example, Robinhood has seen its stock price plunge nearly 60% from its July $38 IPO level, and a whopping 80% from its record intraday high. Reflecting the difficulties faced by overpriced and overhyped stock market debutantes, the Renaissance IPO index, which tracks the average performance of newly listed U.S. companies, sank just over 10% during the year.

That hasn’t dissuaded others from possibly floating their shares on the market. Big names that have either confirmed intentions to go public this year or are reportedly exploring the option include Intel’s autonomous-driving subsidiary Mobileye, social media platform Reddit, fintech startup Stripe, plant-based meat producer Impossible Foods, and TikTok parent ByteDance.

With the Federal Reserve looking to finally rein in red-hot inflation by turning off the monetary spigot, consultants at EY advised any issuers eager to tap equity markets for funding this year to prepare early and strike quickly when market conditions are optimal. 

“Historically, IPO windows are the quickest to close and last to reopen amid periods of market turmoil,” the firm wrote last month.