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Toyota-backed self-driving car company Pony AI has joined the list of Chinese companies going public on the US stock market after a multi-year ban from Beijing on raising capital abroad.
Zeekr, a Chinese luxury electric vehicle startup, debuted on the New York Stock Exchange in May, and WeRide, another autonomous vehicle startup, hopes to file a $5 billion U.S. IPO this year, but its plans have been delayed Because of August.
Pony was valued at $8.5 billion when it raised capital in 2022. Toyota participated in that round as a follow-on investor after pumping $400 million into the startup in 2020, according to PitchBook data. The Japanese automaker’s stake in Pony is 13.4%. Since then, the Chinese AV startup has secured $100 million from Saudi Arabia’s NEOM in 2023, and $27 million from Chinese VC GAC Capital in October.
But a filing that will go public reveals that Pony’s board of directors recently lowered the minimum IPO valuation to $4 billion. Pony also lowered its minimum target for what it wants to raise in the deal from $425 million to just $200 million.
That’s not all that stood out about it Pony’s IPO filingHowever, here are our four most important points.
Modest fleet and operations
IPO filings are full of numbers that were previously either vague or lacked context, and Pony’s is no exception.
The company says it operates a fleet of 190 “robot trucks” in Beijing and Guangzhou, and more than 250 robotaxis in Beijing, Guangzhou, Shenzhen and Shanghai. It can charge robotaxi fares in the top three cities, and is completely driverless in Guangzhou and Shenzhen.
On the robo-taxi side, Pony says it receives an average of 15 requests per day for each robo-taxi from 220,000 registered PonyPilot users. Overall, it says it has accumulated more than 20 million “self-driving miles,” although only 2.4 million of those did not have a human driver behind the wheel.
Pony complements its robotaxi service with a growing robotics business. It says it has already acquired 57 corporate clients, representing 73% of total revenue in the first half of this year. But the majority of that money comes from Pony’s three largest customers, who generated 62.8% of total revenue during the same period.
Revenue up and to the right?
It’s no secret that autonomous vehicles are an expensive business. While Pony says it made total profits of $32 million and $17 million in 2022 and 2023, respectively, the company lost more than $270 million during those years.
A huge driver of these losses was Pony’s spending on R&D. This is understandable, given that Pony is a company developing pioneering technology, which includes a standalone array with very heavy sensors. But we wonder when Pony will prioritize operations over R&D. As of June 30, the startup’s workforce is about 1,300 employees, with 44% in R&D, 16% in technology deployment and production, and just 28.5% in operations. It spent $73 million on R&D employee salaries alone in 2023 and ended the first half of this year with $335 million in cash.
Pony expects it will bring in more money in the coming years, especially as robotaxi prices rise. But she is less optimistic about cost-cutting, because she does not say in her filing that she expects the cost of those revenues to decline over time – only that they “will continue to evolve in the near future.”
Now, Pony’s revenue has nearly doubled to $24.7 million in the first half of 2024 from the same period last year. It also reduced its losses on an annual basis in the first half. But while Pony’s revenue appears to be up and to the right if we just look at the first half of the year, the company still has a long way to go if it hopes to surpass 2023’s total revenue of $71.9 million.
Sixty. Pages. to. risk.
Every company needs to determine the risks associated with the business when going public. But damn it if Pony isn’t incredibly thorough with 60 pages of disclaimers.
One of the main risks? It results from a shortage of sufficiently skilled employees who have knowledge of United States Generally Accepted Accounting Principles (US GAAP) to ensure proper compliance with the requirements of the Securities and Exchange Commission (SEC).
While Pony says it has fixed this vulnerability as of the end of 2023, there is very recent evidence that shows how serious this could be for a young company at Fisker. The EV startup’s descent into bankruptcy was, in large part, caused by missing the deadline to file its financial results for the third quarter of last year.
There’s also the dilemma of the ancient People’s Republic of China, something Zicker is familiar with. We’ll let Pony say it: “Regulatory authorities in the People’s Republic of China have significant oversight over our business and may influence our operations as they deem appropriate to advance economic, regulatory, political, and societal objectives.”
Moving on, Pony included A.J slight Risk of not being able to continue very limited robo-taxi testing in the US due to impending regulations against Chinese connected vehicles. The startup has a permit to test autonomous vehicles with a driver behind the wheel in California, but says its US operations generated “less than 1% of our total revenue in 2023 and the six months ending June 30, 2024.”
The pony paints a beautiful picture
We’re now a few years removed from the SPAC craze, which allowed startups to set obscene expectations about their businesses. Remember when Faraday future Expected Will you sell more than 100,000 electric cars in 2024? Almost 13 have been sold so far.
This is a traditional IPO, so Pony doesn’t have as much license to be so disruptive to its prospects. However, Pony indulges in some delightful images of what her technology can do, and we’d be remiss not to share them with you.
“On the public roads of Chinese capitals, Pony has achieved what has only been depicted in science fiction – building a self-driving car,” the company wrote. “Passengers, wide-eyed and amazed, open the door using the app and climb into the back seat.”
“Upon exiting the vehicle, passengers pay the fare through the app and conclude this amazing journey. Meanwhile, the robotaxi drives itself away to pick up the next passenger, leaving one thinking about what other wonders the future holds.”
Wide-eyed, indeed.
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