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Can Sonos Fend Off the Competition?

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Adam Augusiak-Boro   July 12, 2018

This analysis was conducted by EquityZen Securities LLC.

Sonos filed an S-1 late last week, the official coming out party for a firm as it steps closer towards a public IPO exit. Our Research team takes a deeper dive into the S-1 to uncover what to expect from the luxury speaker company. To view the full, in-depth report on Sonos, please click here.

A Closer Look at Sonos’ S-1

Sonos filed an S-1 on July 6, 2018, signaling the end of its 16-year run as a private company. After launching its first wireless multi-room home sound system in 2005, the company’s products have entered into nearly 7 million households globally. The company plans to list on the NASDAQ under the ticker “SONO”. Timing, pricing, and size of the offering are still TBA.

Bottom Line — Strong Financials, Stronger Competition

Sonos’ S-1 confirms earlier reports of strong top-line revenue as the company is on track to generate over $1B in revenue this coming fiscal year. The company even operated profitably in the first six months of FY 2018. However, the speaker market has been flooded with competitors, from private companies such as Bose to Tech Giants such as Amazon, Apple, and Google. Even Spotify is looking to venture into making its own hardware. We believe that this intense competition will be a primary concern for investors as Sonos heads towards its IPO.

angry power GIF by SpongeBob SquarePants

Validation in the Public Market

Based on our initial estimate, we believe the company could be valued at ~$2.5-3.0B versus the $572M implied valuation from its last private funding round in 2012. Please note that the company completed two tender offers to shareholders in 2014 and 2016 at a premium to the latest round of financing. Our valuation estimate is based on a FTM revenue estimate of $1.26B (assuming 15% y-o-y revenue growth) and an assumed public comparables multiple of 2.0-2.5x P/S.  We believe Sonos’ best public comp is Danish consumer electronics company Bang & Olufsen (2.3x P/S), while the Tech Giants are much larger and diversified businesses vis-a-vis Sonos.

Sonos Valuation Analysis ($ in 000s)

Below, please see our implied valuation range build for Sonos:

Source: Form S-1 (filed July 6, 2018)    

1. Sonos generated 18.1% y-o-y revenue growth in 1H 2018 and 10.1% y-o-y revenue growth at fiscal year end 2017

Sonos Public Comparables (as of July 11, 2018)

In coming up with our initial valuation estimate, we used the following public comps:

Source: Company filings; Yahoo Finance; NYU Stern; EquityZen estimates

2. Sonos’ closest public comparable and an index of consumer electronics businesses yield a P/S multiples range of 2.3-2.5x 

Click here to download the full report, which includes a deeper dive of the analysis above. As you evaluate prior investment decisions or whether to buy SONO in the future, please consider our key investment highlights and considerations from Sonos’ S-1 filing. For more information on all things private markets, IPOs, and investor/shareholder education, please check out our Knowledge Center.


Running for the Exits: The Great Unicorn Stampede of 2018

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Nat Disston   June 14, 2018

We're not yet halfway through 2018 and the year is already being hailed as the return of the IPO. To that end, there were already twice as many IPOs through April 2018 as there were all of 2017. Some have even gone as far as to say the IPO is "back" (where it went is a topic for another day). Among those firms that experienced exit events were household unicorns such as Spotify, Dropbox, and DocuSign. Those familiar with EquityZen's mission know we are proud to say that over the course of the past five years we have conducted 4000+ transactions in over 100+ companies. Now, with some of those transacted firms exiting, we wanted to discuss what these events mean for EquityZen, our investors, and our overall thesis of allocating investment funds for the private markets.


Before we dive into these exits in a bit more detail, please keep in mind that not all private securities investments will result in an IPO or an acquisition and not all IPOs or acquisitions will lead to positive investment returns. Private securities investments are speculative, illiquid, and carry a high degree of risk, including loss of principal.

With that said, 2018 has been a robust year for IPOs; excluding SNAP, the average IPO has been over 85% larger in 2018 vs. the same period last year. While this looks like a seemingly boon time for tech companies, we have also seen less-than-glamorous exits via fire-sales or flops post-IPO (who could forget Blue Apron's IPO tailspin?). In the last 12 months, EquityZen has had 11 portfolio companies exit. Let's take a look at how those investments have performed for us and our investors.


Why Pre-IPO Liquidity is Important for Employees

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Asa Lieberman   May 17, 2018

When Snap Inc. (SNAP) went public in March 2017, the company was valued at over $23B, or $17 per share. While early shareholders watched the stock price quickly rise to a high of $29, they were unable to realize these gains until the IPO Lockup Period expired. For most, those gains slipped away due to poor earnings and increased competition, which caused SNAP to slide below $14 over the course of the 180-day lockup.

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