Four takeaways from Pony AI’s IPO filing

Toyota-backed autonomous vehicle company Pony AI has joined the list of Chinese corporations going public within the US after a years-long ban imposed by Beijing on raising capital abroad.

Zeekr, a Chinese luxury electric vehicle startup, debuted on the New York Stock Exchange in May, and WeRide, one other AV startup, also hopes to launch a U.S. IPO this 12 months at a $5 billion valuation, but its plans have been delayed on account of August.

Pony was valued at $8.5 billion on the time of its 2022 capital raise. Toyota participated on this round as the newest investor after injecting $400 million into the startup in 2020, in line with PitchBook data. The Japanese carmaker’s stake in Pony is 13.4%. The Chinese AV startup has since raised $100 million from Saudi Arabia’s NEOM in 2023 and $27 million from Chinese VC GAC Capital in October.

However, a public filing reveals that Pony’s board recently lowered the minimum IPO valuation to $4 billion. Pony also lowered the minimum goal amount it wants to lift within the deal from $425 million to only $200 million.

That’s not all he stood out for Submission of the Pony public offeringnevertheless, listed below are our top 4 takeaways.

Modest fleet and operations

IPO filings are stuffed with numbers that were previously either unclear or lacking context, and Pony’s is not any exception.

The company says it operates a fleet of 190 “robot trucks” in Beijing and Guangzhou, and greater than 250 robotaxes in Beijing, Guangzhou, Shenzhen and Shanghai. It can charge robot rides in the primary three cities, and is totally autonomous in Guangzhou and Shenzhen.

As for robotaxi, Pony says it receives a median of 15 orders per day for every robotaxi from the 220,000 users registered on the PonyPilot app. Overall, it claims to have collected greater than 20 million miles of “autonomous driving,” though only 2.4 million of them did not have a human behind the wheel.

Pony complements its robotxi service with a growing robotic vehicle business. It says it has already acquired 57 corporate clients, accounting for 73% of total revenues in the primary half of this 12 months. However, most of this money comes from Pony’s three largest customers, who generated 62.8% of total revenue over the identical period.

Revenues up and to the suitable?

It’s no secret that autonomous vehicles are an expensive business. And while Pony says it generated gross profits of $32 million and $17 million in 2022 and 2023, respectively, the corporate lost greater than $270 million in those years.

An enormous reason for these losses was Pony’s research and development expenses. Understandable, considering Pony is an organization developing pioneering technology that features an autonomous stack that is incredibly sensor-intensive. However, we wonder when Pony will actually prioritize operations over R&D. As of June 30, the startup employing roughly 1,300 employees is 44% research and development, 16% technology implementation and production, and only 28.5% operational. In 2023, it spent $73 million on research and development worker salaries alone, and ended the primary half of this 12 months with $335 million in money.

Pony Projects will usher in quite a bit extra money in the approaching years, especially as robotics ticket prices increase. He sounds less optimistic about reducing costs, nevertheless, since the proposal doesn’t indicate that the price of those revenues is anticipated to say no over time – only that these costs “will continue to evolve in the near future.”

Now, Pony’s revenue in the primary half of 2024 has almost doubled to $24.7 million in comparison with the identical period last 12 months. It also made up for year-on-year losses in the primary half of the 12 months. While it looks like Pony’s revenues are growing and moving to the suitable, if we just have a look at the primary half of the 12 months, the corporate still has an extended technique to go if it hopes to exceed its 2023 total revenues of $71.9 million.

SIXTY. PAGES. Z. RISK.

Each company must present the risks related to its business when it goes public. But rattling if Pony wasn’t incredibly thorough and provided 60 pages of disclaimers.

One of the essential threats? This is on account of a shortage of suitably qualified personnel with knowledge of US GAAP (Generally Accepted Accounting Principles) to make sure appropriate compliance with SEC requirements.

While Pony claims to have fixed this weakness by the top of 2023, there’s recent evidence showing how real a risk it could pose to the young company at Fisker. The EV startup’s plunge was largely on account of missing the deadline to report third-quarter financial results last 12 months.

There’s also the mystery of the old People’s Republic of China – something Zeekr is conversant in. Let’s let Pony say it: “The PRC regulatory authorities exercise significant oversight of our business and may influence our business in ways they deem appropriate to pursue their economic, regulatory, political and social objectives.”

Going forward, Pony has factored in the chance of not with the ability to proceed extremely limited robotaxi testing within the U.S. on account of looming regulations on Chinese connected vehicles. The startup has permission to check AVs with a driver behind the wheel in California, but said its U.S. operations generated “less than 1% of our total revenues in 2023 and the six months ended June 30, 2024.”

Pony paints a pleasant picture

We are actually several years removed from the special purpose vehicle merger frenzy that allowed start-ups to make outrageous predictions about their businesses. Remember when Faraday Future predicted would sell over 100,000 electric vehicles in 2024? About 13 units have been sold thus far.

This is a conventional IPO, so Pony doesn’t have that much license to be that concerned about its forecasts. Still, Pony allows himself some flattering ideas about what his technology is able to, which it could be a sin to not share with you.

“On the public roads of China’s metropolises, Pony has achieved what was once only imagined in science fiction – building a car that drives itself,” the corporate writes. “Passengers, wide-eyed in surprise, open the doors using the app and climb into the back seats.”

“As passengers step out of their automobile, they pay their fare via the app and complete this awe-inspiring journey. Meanwhile, the robotaxi departs to choose up its next passenger, leaving him to take into consideration other wonders that the long run will bring.

Wide-eyed indeed.