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Summary

  • TRUE, provider of an online platform that allows consumers to research and secure guaranteed pricing on new cars, plans to raise $101.1 million in its upcoming IPO.
  • TRUE has seen stronger growth, has both entrepreneurial and industry-experienced management, and boasts 1.2 million deals facilitated since 2005.
  • We are positive on this IPO.

TrueCar Inc (NASDAQ:TRUE), provider of an online platform that allows consumers to research and secure guaranteed pricing on new cars, plans to raise $101.1 million in its upcoming IPO.

The Santa Monica, California-based firm will offer 7.8 million shares at an expected price range of $12.00-$14.00 per share. If the IPO can reach the midpoint of that range at $13.00 per share, TRUE will command a market value of $1.1 billion.

TRUE filed on April 4, 2014.

Lead Underwriters: Goldman Sachs & Co, J.P. Morgan Securities LLC, RBC Capital Markets LLC
Underwriters: Cowen and Company LLC, JMP Securities LLC

A TRUE Overview
TRUE offers an online platform that allows consumers to find market-based pricing data on new and used cars and to connect with the firm's TrueCar Certified Dealers network. The platform is available both on the company's website and in customized forms for marketing partners including USAA, Boeing, Verizon, financial institutions, and others.

A basic start page is shown below.

(click to enlarge)

(usedcars.truecar.com/)

Consumers can find data about what others have paid for specific makes and models and estimated prices for the same make and model from the firm's certified dealers. These prices typically include savings off of MSRP, which consumers can take advantage of by taking Guaranteed Savings Certificates to certified dealers, which can then be applied to their purchase.

TRUE believes that its platform benefits consumers by finding savings on new cars (approximately $3,000 less on average in 2013 than MSRP) while simultaneously benefiting dealers by attracting more business.

Since the company's founding in 2005, TrueCar users have purchased over 1.2 million cars.

Valuation
TRUE offers the following figures in its S-1 balance sheet for the three months ended March 31, 2014:

Revenue: $43,930,000.00
Net Loss: ($9,921,000.00)
Total Assets: $173,925,000.00
Total Liabilities: $33,980,000.00
Stockholders' Equity: $110,721,000.00

TRUE has experienced rapid gains in revenues over the past several years; the firm posted revenues of $38.1 million, $76.3 million, $79.9 million, and $134.0 million for the years ended December 31, 2010, 2011, 2012 and 2013, respectively. Over the same periods, the firm posted net losses of $4.4 million, $8.9 million, $74.5 million, and $25.1 million, respectively.

Competitors
TRUE competes with other providers of automotive information and with other marketing channels for auto dealers, some of which have access to greater financial resources than TRUE. Competitors include Google Inc (NASDAQ:GOOG), AutoTrader.com, Cars.com, Autobytel Inc (NASDAQ:ABTL), Edmunds.com, sites operated by auto manufacturers, and offline media and classified ads.

Entrepreneurial Management
Co-founder Scott Painter has served as TRUE's Chairman and CEO since February 2005; he also served as President from April 2005 to August 2010.

Mr. Painter's current ventures also include PriceLock Inc and BrightHouse, Inc, both of which he co-founded. He previously founded and served as chairman of Build-To-Order, Inc.; co-founded and served as chairman of Direct Ventures, Inc.; founded and served as chairman of Advertise.com, Inc.; founded and served as CEO of CarsDirect.com, Inc.; and founded numerous other companies.

Mr. Painter studied Political Science and Systems Engineering at the United States Military Academy at West Point and Economics at the University of California, Berkeley before leaving Berkeley to sell his first auto-related start-up, AUTOAccess.

Strong Outlook for TRUE's IPO
We are positive on this IPO in the proposed range.

We're encouraged by the TRUE leadership team's extensive entrepreneurial experience. TrueCar also recently named John Krafcik, former President & CEO of Hyundai Motor America, as President.

The firm has seen strong growth in its revenues over the past several years. Though the firm did post a net loss of $25.1 million in 2013, it was a significant improvement over the 2012 net loss of $74.5 million.

As consumers continue to put greater effort into finding the best possible deals on cars through internet research, TRUE's Guaranteed Savings Certificates will likely prove ever more popular.

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Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TRUE over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Investors Should Rev Their Engines For TrueCar's IPO