The parking lots at the big name rental car operations (think Hertz and Enterprise) are usually filled with the same generic offerings no matter where you travel. Expect to be offered a minivan or a Chevy Suburban if youre travelling with a family or large group of friends, and to be stuffed into a four-door sedan if youre riding solo. These downsides are what make options like Turoa company heading for their very own IPO dateso appealing.
For those who are on vacation (or simply enjoy travelling in comfort and style) these limited options can be a real drag. Enter Turo. Something along the lines of an Airbnb for cars, Turo is available in over 5,500 cities across the Americas and the UK. Among their offerings lie everything from Bentleys to classic muscle cars to souped-up family cars.
TL;DR
- Turo was originally launched in 2010 under the name RelayRides. It was founded in Boston by Shelby Clark in Boston, who found inspiration from other peer-to-peer companies like eBay and Airbnb (which was, at the time, only a two-year-old company).
- The initial technology behind the idea was to install GPS monitoring devices into all cars available for rent, but that was soon scrapped in favor of transitioning to a key-exchange based model.
- Turo incurs no costs from ownership of the cars that they rent out, as they simply dont maintain ownership of any of the vehicles on their platform. By acting instead as a middleman or broker between two parties, Turo is able to avoid having to pay hefty insurance premiums on a fleet of cars.
- Earlier this year, CEO Andre Haddad told the Wall Street Journal that he plans to take Turo to market in 2021, but has not yet decided which route the company will take.
- The company had its first ever profitable quarter for Q1 of 2021. They increased their revenue by seven percent during the coronavirus pandemic as travel habits shifted away from long, cross-country and international trips to shorter, more local getaways.
A quick company history of Turo
Shelby Clark founded RelayRides (now Turo) while living in Boston during 2010 as a way to get more use out of underused and dormant cars in the city. Before the company’s nationwide launch in 2012, Clark made a handful of significant changes to the business that would shift its directional focus moving forward.
Clark was the first to decide to move his companys headquarters from Boston to the tech hotspot of San Francisco, joining other prominent tech companies and startups that called Silicon Valley home. By the time 2011 rolled around, Clark decided to step down as CEO. He brought onboard Andre Haddad to take over the day-to-day operations of the company. Haddad brought experience from his time as an executive at eBay and, most recently, as CEO of Shopping.com.
Turo fundraising to keep on the backburner
Turo has acquired funding from a variety of different backers since their founding. The quick and dirty numbers are as follows: $467.4 million raised by 30 different investors over 12 distinct roundings of fundraising.
Their largest chunk of funding comes from a Series E offering in 2019, in which InterActiveCorp (IAC) was the sole investor, giving a total of $250 million. This makes IAC the single largest investor in Turo to date. The company also owns other well known brands such as HomeAdvisor, Vimeo, Match Group, and Dictionary.com.
Path to the Turo IPO
While Turo has announced publicly that it will be going to market in 2021, Haddad has also expressed that he has yet to decide exactly how Turo will become a publicly traded company.
In short, Turo has a few options. One is to go the traditional route, by partnering with an advisory firm such as Goldman Sachs or Ernst & Young to help guide Turo to their IPO via traditional means. This would include financial evaluations of Turos operations, the underwriting of Turos new securities, and other crucial (often drawn out) steps.
Turo could also potentially go public via a direct listing, which is basically a traditional IPO without all the strings attached.
Related: Direct listings vs IPOs
The third option is one that’s holistically less popular but increasingly of interest to business owners: going to market via a special purpose acquisition company, more commonly referred to as a SPAC. If Turo decides to pursue this path to market, they will merge with a SPAC, also known as a blank check company. These blank check companies raise funds which are then used for the purpose of acquiring a private company, making that company publicly traded in the process. Other high profile companies like DraftKinds, Virgin Galactic, and Opendoor have all recently gone to market via a SPAC merger.
Related: What to know about Opendoor’s 2020 IPO
When is the Turo IPO date?
The company has yet to publicly announce the Turo IPO date of market debut. Traditionally, the second and fourth quarters of the year incur the majority of annual IPOs that are filed within any given calendar year. This is so the offering takes place during either the spring or fall, avoiding the summer months and winter holidays when trading volumes are likely to be lower.
What investors should know about the Turo IPO
The traditional rental car market took a steep dive during the pandemic, with industry giant Hertz filing for Chapter 11 bankruptcy this past May. With lockdowns and quarantine restrictions still in place, the travel and hospitality industries havent had the opportunity to bounce back to their pre-pandemic levels of success.
Butas the saying goesone mans garbage is another mans gold.
With traditional rental companies taking a hit, Turo has undoubtedly found an opportunity for growth. They responded well to the crisis, even turning over their first profitable quarter since their founding.
Investors should know that while Turo managed to weather the storm and come out stronger on the other side, so did their biggest competitor, Getaround. Both companies reported increases in revenue and profitability last year. But as of yet, Getaround hasnt announced any plans to take that success and take their company public.
We mentioned earlier that Turo doesnt actually own any of the cars that you can rent on its platform. While this clearly presents as a strength in that the company doesnt have a fleet of vehicles to maintain and pay insurance on, it also means they dont have any underlying assets should (for whatever reason) the individuals renting out their cars on the app choose to stop doing so.
Similar to hotel booking sites, Turo makes money through charging customers booking fees, and by taking a cut off the top of the rentals fees paid between two parties. This business model has certainly shown to be a successful one for many companies in the past, but its also one that lends itself to great levels of volatility, particularly during an economic downturn.
With the pandemic-induced recession, Turo was able to skew their business in the positive direction because of the nature of the pandemic. With flights and interstate travel being restricted for safety precautions, many have turned to taking smaller, more frequent trips closer to home, as opposed to flying out somewhere for a week. With Turo, theyre able to spend the money saved by not flying to rent a spacious or luxurious car of their choice to travel in instead.
Bottom line
CEO Andre Haddad has demonstrated through his strong performance during the coronavirus pandemic that he has the business acumen to guide his company through times of uncertainty. By cutting costs early onmainly in the form of layoffs and salary reductions for executiveshe was able to maintain a strong reserve of cash throughout the following months, which in turn allowed Turo to turn a profit in Q4.
Like any other company, theres one spot about Turos business model that gives many hesitation. With an income strategy based entirely around charging booking and rental fees, Turo puts a tremendous amount of weight on the desires of consumers at large. Should the travel market take another hit, or if even stricter lockdowns went into effect at some point, the company would surely struggle with the loss of revenue.
Turo hopes to alleviate these concerns by going public, which will give it a stronger reserve of liquid finances. The process will also allow the company to develop more offerings to add to their service, possibly branching out into other aspects of the travel industry such as lodging or dining.
By diversifying its portfolio of offerings, the company stands to gain a stronger foothold in the competitive rental marketplace, and will also give itself additional lines of revenue to lean on should one of its original service lines take a turn for the worse.
In short, the Turo IPO date has potential for investors whose goals align with the companybut it’s all up to the market in the end.