For its core India business for the financial year 2018, Oyo reported revenues of just $61 million and a loss of $53 million.
How on earth does this translate into a $10 billion valuation? For comparison, Hyatt's market cap is $7.9B, and they made $296M profit on $1,215M in revenue in Q3:
I imagine the valuations are based mostly on the price paid for whatever % of Oyo shares investors have bought up. In any non-VC type business, valuation would be based on an estimate of what free cash flow would look like in a 1-yr, 5-yr and 10-yr period. Depending on the type of business and its growth stage, the time horizons and assumptions may vary.
When the valuation is based on investment by investors already in the deal... It does not imply that they think there’s a plausible path for the business to be worth the money.
As events have shown with WeWork, it implies that they are maintaining the façade for a little while longer while hoping o get to the point where they can unload the business onto the public markets.
Asking SoftBank what they think their investments are worth is like asking me what I think my house is worth. You Have to go by what arms-length investors are willing to pay.
I really think we need a new rule where nobody quotes a valuation if the last round involved existing investors and/or founders pumping up the valuation with additional investment.
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How on earth does this translate into a $10 billion valuation? For comparison, Hyatt's market cap is $7.9B, and they made $296M profit on $1,215M in revenue in Q3:
https://s2.q4cdn.com/278413729/files/doc_financials/2019/q3/...
Hyatt should just call itself a tech company and increase its valuation 10x
And add Blockchain to the name for an additional 50x valuation.
“Iced tea company rebrands as “Long Blockchain” and stock price triples.”
https://arstechnica.com/tech-policy/2017/12/iced-tea-company...
I imagine the valuations are based mostly on the price paid for whatever % of Oyo shares investors have bought up. In any non-VC type business, valuation would be based on an estimate of what free cash flow would look like in a 1-yr, 5-yr and 10-yr period. Depending on the type of business and its growth stage, the time horizons and assumptions may vary.
The valuation does not come from their operating numbers, core or otherwise. It comes from their last round of funding.
I'm aware of that, but the valuation implies that at least the investors think there's a plausible path for the business to be larger than Hyatt.
When the valuation is based on investment by investors already in the deal... It does not imply that they think there’s a plausible path for the business to be worth the money.
As events have shown with WeWork, it implies that they are maintaining the façade for a little while longer while hoping o get to the point where they can unload the business onto the public markets.
Asking SoftBank what they think their investments are worth is like asking me what I think my house is worth. You Have to go by what arms-length investors are willing to pay.
I really think we need a new rule where nobody quotes a valuation if the last round involved existing investors and/or founders pumping up the valuation with additional investment.