Toyota-backed autonomous vehicle company Pony AI has joined the list of Chinese companies going public in the United States after a multi-year ban by Beijing on raising capital abroad.
Zeekr, a Chinese luxury electric vehicle startup, debuted on the New York Stock Exchange in May, and WeRide, another audiovisual startup, also hopes to file for an IPO in the United States this year at a valuation of 5 billion dollars, but its plans were delayed because of August.
Pony was valued at $8.5 billion when it raised capital in 2022. Toyota participated in this round as a follow-on investor after injecting $400 million into the startup in 2020, according to data from the PitchBook. The Japanese automaker’s stake in Pony stands at 13.4%. The Chinese audiovisual startup has since secured $100 million from Saudi firm NEOM in 2023 and $27 million from Chinese VC GAC Capital in October.
But the publicly released filing reveals that Pony’s board recently reduced its minimum IPO valuation to $4 billion. Pony also lowered its minimum target for what it wants to raise in the deal, from $425 million to just $200 million.
That’s not all that stood out about Pony’s IPO filing, so here are our four main takeaways.
Fleet and modest operations
IPO filings are full of numbers that were previously obscure or lacking context, and Pony’s is no exception.
The company says it operates a fleet of 190 “robot trucks” in Beijing and Guangzhou, and more than 250 robo-taxis in Beijing, Guangzhou, Shenzhen and Shanghai. It can charge robotaxi fares in the top three cities and is fully driverless in Guangzhou and Shenzhen.
On the robotaxi side, Pony claims to receive an average of 15 daily orders per robotaxi from the 220,000 users registered on the PonyPilot application. In total, it claims to have accumulated more than 20 million “self-driving miles,” although only 2.4 million of them had no human driver behind the wheel.
Pony complements its robotaxi service with a growing robotruck business. The company says it has already acquired 57 enterprise customers, representing 73% of total revenue in the first half of this year. But the majority of that money comes from Pony’s top three customers, which generated 62.8% of total revenue during the same period.
Income up and to the right?
It’s no secret that autonomous vehicles are expensive. And although Pony claims to have generated gross profits of $32 million and $17 million in 2022 and 2023, respectively, the company lost more than $270 million in those years.
Pony’s R&D spending is a major contributor to these losses. This is understandable, given that Pony is a company developing pioneering technology, involving an extremely sensor-heavy autonomous stack. But we wonder when Pony will truly prioritize operations over R&D. As of June 30, the startup’s workforce of approximately 1,300 employees was 44% R&D, 16% technology deployment and production, and just 28.5% operations. The company spent $73 million on R&D employee salaries alone in 2023 and ended the first half of this year with $335 million in cash.
Pony projects that it will bring in a lot more money in the coming years, especially as robotaxis prices increase. But he seems less optimistic about reducing costs, because in the filing he doesn’t say he expects the cost of those revenues to decline over time — only that those costs “will continue to evolve over time.” the near future.”
Now, Pony’s revenue has nearly doubled to $24.7 million in the first half of 2024 compared to the same period last year. It also narrowed its losses year-over-year in the first half. But even though it appears that Pony’s revenue is growing and to the right when looking at just the first half of the year, the company still has a long way to go if it hopes to surpass 71.9% in total revenue. million dollars in 2023.
SIXTY. PAGES. OF. RISK.
Every company must outline the risks associated with its business when it goes public. But damn if Pony wasn’t incredibly thorough with 60 pages of disclaimers.
One of its main risks? This comes from a shortage of personnel sufficiently qualified and knowledgeable in US GAAP (generally accepted accounting principles) to ensure proper compliance with SEC requirements.
Although Pony claims to have fixed this weakness in late 2023, very recent evidence shows how much of a real risk this can be for a young Fisker company. This electric vehicle startup’s slide into bankruptcy was, in large part, triggered by its failure to meet the deadline to file its financial results for the third quarter of last year.
There’s also the old conundrum of the People’s Republic of China – something Zeekr knows well. Let Pony say it: “PRC regulatory authorities exercise significant oversight over our activities and may influence our operations as they deem appropriate to advance economic, regulatory, political and societal objectives. »
Moving on, Pony included a light may be unable to continue its extremely limited robotaxi testing in the United States due to looming regulations against Chinese connected vehicles. The startup has a permit to test autonomous utility vehicles with a driver behind the wheel in California, but it says its U.S. operations generated “less than 1% of our total revenue in 2023 and the next six months completed on June 30, 2024.
Pony paints a nice picture
We are now a few years removed from the special-purpose M&A craze that allowed startups to make outrageous projections about their businesses. Remember when Faraday Future predicted selling over 100,000 electric vehicles in 2024? About 13 have been sold to date.
This is a traditional IPO, so Pony doesn’t have as much license to be so bothered by its projections. Nonetheless, Pony indulges in self-flattering images of what its technology is capable of that we would be remiss not to share with you.
“On the public roads of Chinese metropolises, Pony has achieved what was once only described in science fiction: building a car that drives itself,” the company writes. “Passengers, eyes wide with wonder, unlock the door using the app and climb into the back seat.”
“Upon exiting the car, passengers pay the fare via the app and complete this impressive ride. Meanwhile, the robo-taxi moves away to pick up the next passenger, leaving everyone to ponder what other wonders the future has in store.
Wide-eyed, indeed.