Valuing An Ipo Using Comparables

Valuing an ipo using comparables

Schrute and Downtown, thanks for your answers!

I actually kind of forgot about this thread because I was assigned other, more urgent tasks. However, now that those projects are over I'm back working on those IPOs haha.

Private Company Valuation

I was able to receive some clarification on what I have to do:

The goal is to find some IPO "success stories" in the cleantech sector (on which my VC focuses) and make a a few case studies of those stories. Since VCs are usually locked in for up to 12 months a success story will most likely be a stock with a positive 1 yr return.

For my case studies, I will probably only pick the "successful" IPOs that happened after the crisis (which are very very few lol).

Now, my question is, what kind of info should I put into this case study?

Valuing an ipo using comparables

Obv a description of the company's business model etc. but can you guys think of something in particular that could be of interest to the VC?

In addition to the case studies, I was asked to compare EBITDA multiples of comparable companies at time of their IPOs. (To get an idea of how our portfolio companies should be valued when they let their shares float).

If I understand correctly, I'm supposed to plot EV/EBITDA against EBITDA margins at time of IPO, identify the outliers and come up with a hypothesis as to why they stand out.

Valuing an ipo using comparables

Fun fact, there is barely any correlation between EBITDA multiples and margins and the scatterplot looks as random as it gets, even after I split the companies up into differenet sectors (solar, water etc).

I'm a huge newbie when it comes to those kind of things (rising junior, first internship, never took a relevant class besides Accounting 101 and Corp Fnce 101...)..therefore I was wondering, how should EBITDA margins affect EV/EBITDA...moreover, I realized that EBITDA multiples at the time of IPO seem very strange, to say the least...when I used the first pricing date I could get something like 20, when I used the day after the first pricing date it would suddenly jump to 80 etc.

You could really help me out if you could kind of give me the intuition what exactly EV/EBITDA means for a freshly listed company (shouldn't EV equal market cap at this point?!)

Downtown, I already included first day pricings. Crazy what kind of first day returns some companies had (both negative and positive..)

Thanks for all your input!

Valuing an ipo using comparables