Proptech valuation dichotomy
Updated: Mar 1, 2022
While not advising in any way about buying or selling stocks, first days of January 2022 reminded us of how underlying dynamics of markets could be hard to spot under the big impacts of index and ultra-large-cap. Recent fall of Nasdaq from historical maximum has been characterized by a sharp fall of large group of small/medium stocks, a downtrend in course from months.
This article could give a larger and deeper overview of what i'm saying.
While growth equity is continously attracting (and recycling) new money addressing new rounds at increasingly incredible valuations for private companies (i'm seeing valuations of billions for recently formed companies with untested strategy), listed companies in the large Proptech arena are showing a serious fall since the summer and the SPAC bonanza deluge.
I've created a dummy portfolio representing a number of listed companies active in the large Proptech space, with more or less an equal weight just to skip the heavyweight of names as AirBnb in terms of market cap.
It's evident as, since the summer, the crash of recent business combinations is bringing large losses in the investors' portfolios. Valuations at no-sense ratios is combining with a repricing of market forecasts for rates under the pressure of escalating price pressures.
Most part of the value of those companies is in the terminal value and, being actually loss producing/cash burning, the pressures in valuations is escalating under a repricing of the rates and failures to deliver the hyperbolic assumptions.
Some sectors are suffering way more than other, firstly i-buyers after the Zillow shock, also if some other players are excessively punished IMHO, and some smart tech as Latch and Vivint are punished harldly due to some supply chain issues.
Also Matterport, notwithstanding the metaverse hype and the great things are deploying (BIM tools in primis), is being repriced but still trading at expensive ratios.
New business combinations have been announced, Selina and Sonder in primis, at not cheap valuations, but probably could be supported in the current scenario where markets is going to price the end of the pandemic.
I guess that the SPAC and IPO euphoria is gone, what amazes me is why private equity is so desperate to not link the valuation repricing on their recent deals, or better, why new investors are not asking for large discount reflecting the liquid markets conditions.
On 19 January i guess it could be a seasonal low for those segment, also if much stocks trade at excessive multiples.
I'm betting that for the first time it could be possible for small investors explore and build a portfolio of proptech companies at decent discount to initial values, exactly when initial fools are taking the opposite stakes.
Update on 1 march 2022.
Here's an article published on WSJ Real-Estate Venture Boom Is Tested by Stock Market’s Slide - WSJ testifying that private rounds valuation have been slashed by half!!!!! Finally sanity is coming.
Sonder has pushed the business combination without revising terms. Result? A loss of 40-50% post listing! Congrats!