Dark Clouds Ahead For Eventbrite With Lockup Expiration

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About: Eventbrite, Inc. (EB)
by: Don Dion
Summary

When the Eventbrite IPO lockup expires on March 19th, pre-IPO shareholders and company shareholders will be able sell large blocks of currently-restricted shares for the first time.

More than 66 million shares of EB are subject to the 181 IPO lockup period. Just 10 million shares of EB are trading pursuant to the IPO.

Aggressive, risk-tolerant investors should consider shorting shares of EB ahead of the March 19th IPO lockup expiration.

March 19, 2019 concludes the 181-day IPO lockup period for Eventbrite Inc. (EB).

When the lockup period ends for Eventbrite, its pre-IPO shareholders and company insiders will have the opportunity to sell more than 66 million currently-restricted shares for the first time.

(Source: S-1/A)

With just 10 million shares of EB trading pursuant to the IPO, a sudden increase in stock traded on the secondary market could negatively impact the share price of EB in the short term.

Business Overview: Provider Event Management Solutions

Eventbrite operates an online platform that enables creators to plan, promote, and produce live events. The company promotes this platform as capable of reducing costs and friction, increasing reach, and improving ticket sales. The business model charges creators on a per-ticket basis when the ticket is paid for. In 2017, approximately 700,000 creators sold 203 million tickets to about 3 million events across 170 countries. The online platform handles any type of event regardless of the frequency, size, country, or category. This includes cultural celebrations, classes, music festivals, wellness activities, seminars, and fundraisers. Over 95 percent of the creators who used Eventbrite in 2017 signed themselves up with the platform. The company derived 54 percent of its revenue from those creators. Eventbrite also has a sales team that works to acquire creators in specific event categories.

(Source: Eventbrite website)

Eventbrite was originally known as Mollyguard Corporation. It changed its name to Eventbrite in 2009. The company has approximately 1,000 employees and keeps its headquarters in San Francisco, California.

Business overview sourced from the firm's S-1/A and website.

Financial Highlights

Eventbrite reported the following third-quarter highlights for the period ending September 30, 2018:

  • Revenue growth of 45.1 percent for a total of $73.6 million.

  • Paid ticket sales reached $23.9 million.

  • Gross profit was $42.2 million and EBITDA of $11.2 million.

  • Operating loss increased from $10.4 million to $13.1 million.

  • Net loss of $35.5 million, which includes a one-off $17.2 million loss to extinguish debt.

Financial Highlights sourced from the Eventbrite website.

Management Team

Co-founder, CEO, and member of the board Julia Hartz served as President until April 2016. Her previous experience includes positions at Fox Networks Group and MTV Networks. She earned a bachelor of arts degree in telecommunications from Pepperdine University.

CFO Randy Befumo has served in his position since November 2016. His previous experience comes from positions at Legg Mason Capital Management. He earned a bachelor of arts degree from The College of William and Mary.

Company bios sourced from the Eventbrite website.

Competition: Fonteve Events, ePly, Doubleknot

Eventbrite faces competition from other event management solutions such as Fonteva, ePly, Doubleknot, Ticketbud, Eventbee, Gather, ZapEvent, Fundly CRM, Picatic, Cvent, XING Events, Eventzilla, TicketTailor, eTouches, Regonline, EventMobi, and Configio.

Early Market Performance

The underwriters priced the IPO at $23 per share, at the high end of its expected price range of $21 to $23. The stock closed its first day at $36.50 for a fist day return of 58.7%, but it began declining afterwards. It reached $25.12 on October 24, but recovered slightly to reach $32.42 on March 7. The stock currently trades around $22.50.

Conclusion

When the Eventbrite IPO lockup expires on March 19th, pre-IPO shareholders and company insiders will be able to sell more than 66 million shares of currently restricted stock for the first time. With just 10 million shares trading pursuant to the IPO, any significant sales could flood the secondary market with shares and drive EB's share price sharply lower in the short term.

This group of pre-IPO shareholders and company insiders includes numerous individuals and corporate entities.

(Source: S-1/A)

Aggressive, risk-tolerant investors should consider shorting shares of EB ahead of the March 19th lockup expiration next week. Interested investors should consider covering short positions either late in the trading day on March 19th or early in the trading day on March 20th.

Disclosure: I am/we are short EB. 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.