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Stubhub in a hot IPO market, Will this one face the chill? Who controls public companies? We jargon bust Dual class shares and Open Door New CEO, new Board, a fundamental change or a new meme moment for Monday, September 15th, it's Brew Markets Daily and I'm Ann Berry. More market details to come. But first, Opendoor, the digital real estate platform, has a new CEO in seed today, a new board and a new cash infusion, which just goes to show that a lot can happen in just one week. Last Tuesday, activist investor Eric Jackson joined me here on Brew Markets to discuss why he believes that Opendoor has been undervalued and why he's taken to X in recent months to make retail investors aware of his thesis. I really enjoyed the debate with Eric over whether Opendoor is a meme stock or not. So check out the episode for the background here because this story around what's going on at Opendoor is not going away anytime soon. Now, since that interview last Tuesday, Opendoor's share price has shot up more than 50%. We can see it, those of you on video in the share price chart, literally a vertical climb in various parts of it. But the stock has been volatile on the path upwards as the market has absorbed news of change. So what's been going on? Well, first, former Shopify executive Kaz Najatian is now CEO to lead a turnaround. Kaz's resume reads very differently from that of his predecessor, Carrie Wheeler, who served as Open Door's chief financial officer before becoming CEO and before that she'd had a nearly 25 year career on Wall Street. Instead, Kaz has a background in product management, spending six years at Shopify and Operations and before that and product at Facebook and earlier as an entrepreneur. Interesting fact, he started his career as a corporate lawyer. Now what really caught my eye is his pay package, which has a five year incentive plan that's very heavy on stock awards to get him to nearly 12% ownership of Open Door worth over $2.75 billion. If if he delivers on driving up the share price over that time period to new highs. Second, co founders Eric Wu and Keith Raboys are back on Opendoor's board of directors and they haven't wasted any time making their presence known. Keith has been out on TV suggesting that cuts are coming, saying on CNBC, quote, There's 1400 employees at Opendoor. I don't know what most of them do. We don't need more than 200 of them. He's also a managing director at venture capital firm Khosla Ventures, which has, alongside Eric, just invested $40 million into the company, which was really a gesture of confidence. Open door had nearly $790 million of cash available 10 weeks ago, and so $40 million is small compared to that and also compared to the company's now nearly $7 billion market cap. So here's why we'll keep watching. Wall street analysts have not yet updated their research on Opendoor to reflect all this change. Nine out of ten published institutions had sell ratings on the stock coming into September and maximum price targets for $2. Part of the lack of research updates so far is that the new board and CEO need a minute to talk about what they will change with fundamentals, how they will tackle a still tough housing market, what they will do to generate new revenue streams, and when cash burn will come down. But when those fundamental changes are clarified, we will report back on whether, if at all, the vast gap in belief in Open Door that exists between institutional and retail investors has a chance of narrowing. Coming up, we break down what to look for in StubHub's IPO, and we bust through the jargon on Dual class shares, AKA the jostle for control. But First Brew Markets daily is sponsored by Public for folks ready to take investing seriously. Now, before the show today, our producer John mentioned a feature he recently found on Public that's right, I've been getting.
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Portfolio insights from Alpha Public's AI powered research assistant. Then I discovered Alpha can do recaps of earnings calls, and that's where I love getting the inside peek into a business as soon as it shares its updates.
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And Public gives you smarter context in which to use a wide range of asset classes, offering the tools you need to build and manage your wealth, whether it's with stocks, options, bonds or crypto. So get started at public.com brewmarkets that's public.com BrewMarkets paid for by Public Investing.
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Full disclosures and Podcast Description the ticketing.
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Platform StubHub is expected to go public this week after a few false starts because the company did initially file all the way back in the spring. I took a look at its IPO prospectus then, but the company has been running an IPO roadshow starting last week, and the idea is that the shares will begin trading this Wednesday. Well, we wanted to explore the fundamentals of the business, the market for resale tickets to events, and talk about what we might see this week. It's been a hot IPO market so far this year, but StubHub may have some cooling factors at play so, John, take us through the landscape here. What's been going on with StubHub?
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Okay, so here's the story of StubHub. Its founding. It might be a bit apocryphal, but it was started by Eric Baker. He created StubHub 25 years ago, and the story was that he was unable to get tickets to the Lion King on Broadway. So he was there trying to get a ticket, he couldn't. And he took this problem back to the Stanford Business School. And according to StubHub, he created the first online marketplace for secondary tickets with the goal of bringing liquidity, transparency, and trust to the category.
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So just to remind it, this was the early days, right? Fairly early in the Internet, still a time when the secondary market for events meant going to a ticket scalp. I would literally stand in line. Do you remember this? And folks would come up trying to.
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Sort of hawk, yeah, got to, need to, got to need to, that kind of thing.
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Exactly.
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And so then in 2007, StubHub was acquired by ebay. And so Eric, without running a company, he was traveling in England and he couldn't get tickets to a soccer match. So he founded Viagogo, which is a ticket exchange similar to StubHub, but more for international scalability. And then Finally, Eric and Viagogo were reacquired StubHub from eBay in 2019. So that's what's happening with the IPO now.
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Fascinating founder story. And you do tend to find that in the run up to IPOs, companies that are still being led by their founders really lead in to sort of the origin story, the creation story, as part of getting a sort of enthusiasm going. Well, in terms of enthusiasm for this ipo, John, it is hotly anticipated. Like I said, there were rumors it was coming out earlier this year. It didn't. And here it is looming this week. And I'd read in Bloomberg last week that, and we mentioned this at the end on the show on Friday, that the IPO looked like it was 20 times. Sorry, that it was oversubscribed. And there's since been numbers today suggesting that there are 20 times as many orders for shares in this company as there are the sort of a number that's going to be made available. And so when we put this in perspective, StubHub is targeting a valuation around $8.6 billion. It's looking to raise $800 million in cash to pay down debt by offering shares priced between 22 and $25. I got to tell you, I'm excited to break this down with you, because I'm slightly confused as to this valuation. Just to give everyone some perspective, if you go back and see where this company was valued in 2021, when Star Pub raised money in the private markets, it was valued at $17 billion. So it's got to go out and persuade people that, yes, the valuation is sort of cut in half, but there's upside to come.
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And maybe they're looking at the macro environment. We keep hearing surveys that the younger generation, millennials, Gen Z, they prefer experiences over material goods. So they're looking to money to go out to a sports event or to see a concert. And StubHub has been doing a lot of business. Last year, buyers from over 200 countries purchased over 40 million tickets from over 1 million sellers. They've been touting those numbers. And of course, the way StubHub works, they're taking a fee from both sides from each one of those transactions. So the seller pays a vig and the buyer pays a VIG, and StubHub is collecting off of that. In 2024, the company generated $8.7 billion off of ticket sales and 1.8 billion of revenue.
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And it really just. To your point, the appetite for experiences has been just incredible since COVID And if we think about all of these blockbuster tours that we've seen, Beyonce, Taylor Swift, when was the last time you went to a concert or live music?
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It's been a while, but I love going out. Or sports. You know, there's sports, too. We couldn't go out to sports events, so I went to see a Chicago Cubs game recently. I love that. But what concerts are you going to?
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I'm going to see Chapel Row and playing on Saturday. I'm really excited. I think that's going to be a ton of fun. Well, it will. All this activity with all this demand for Tickets. Last year, StubHub generated $255 million in free cash flow. And so when we think about the business model, right, it is a marketplace. It is software, right? You do see juicy margins when it comes to software businesses. The interesting thing is if you will go and look at something called the S1, this is the IPO filing, and you can find this on the SEC's website. I always read this because I find I go and nerd out on the documents. This one's got quite a few pictures in it, and you see several diagrams in there where StubHub says, Look, we have this platform, we have this marketplace, but we want to do more with it. We want to get more users on there aggressively because that generates a flywheel. More users, more data, more personalization. Read into that. More pricing that's personalized or targeting. More targeting and bringing down the amount that they spend on marketing. I'm going to come back to that because they've been spending a ton of money on marketing. But it's worth talking about the fact that even though this business is taking a cut of transactions, it doesn't hold inventory. Those are typically asset light businesses. StubHub does have some heady competition. Right? Let's talk about that.
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Right. So their biggest competition is Ticketmaster, which is owned by Live Nation. And Live Nation. Here's the distinction. Ticketmaster and Live Nation are primary ticket sellers.
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Right.
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So StubHub is a secondary market for selling tickets that have already been sold once. And StubHub is trying to get into the primary ticket market little by little, but really it's dominated by Ticketmaster.
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Yep.
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And Ticketmaster, through Live Nation, owns their venues, many of the venues.
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Right.
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And so they have a real opportunity there to sell tickets that StubHub doesn't have.
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Yeah. It's amazing to see what's been going on with Live Nation. And another thing I would just add to that, just to put some numbers around this, the sheer scale of Live nation. It's a $40 billion ish market cap business. To your point, it owes venues around the world. It owns Ticketmaster. Now, just one thing worth pointing out is that the justice department, along with 30 state and district attorneys general, filed a civil antitrust lawsuit against Live Nation, saying that you have been using your, your dominance in the venue space, your dominance with Ticketmaster to engage in monopoly like behavior. DOJ does not like monopolization. And there's been a real question mark in the market around what this means for Live Nation, where the worst possible outcome is that Live Nation is forced to sell Ticketmaster. Now, there's a really important trial coming up on this matter in March 2026. And there's one school of thought. You've got some people saying, well, this is an opportunity for StubHub.
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Sure.
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Right. If Live Nation is forced to part with Ticketmaster and Ticketmaster is forced to stand on its own without the might of Live Nation behind it, then Star Pub has a chance to get more active in primary sales and to continue to build on its position in secondary marketing, where Ticketmaster has 25% share Live Nation, despite the sword of Damocles, which is this lawsuit potentially hovering over them, the share price is still up 33% year to date. So it's interesting that the market's sort of shrugging, even as others are saying this could be an opportunity for StubHub. Let's also talk a little bit about Vivid Seats. You brought that up earlier today.
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Sure. That's another company. And they're. They're public. It's ticker symbol seat, which I like.
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Love that.
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And their stock price has been down 80% this year. So they're trying to compete with Ticketmaster. They're trying to compete with StubHub. It's a really difficult area. And here's another challenge to being a ticket reseller. In May, the FTC imposed a new rule on secondary ticketing business where they said you have to put the total fee of how much the ticket is going to cost initially. So you can't just say this ticket is $5, and then when you go to check out, you find out it has $15 in fees. And so that might hurt the secondary ticket market. And also, some big artists are pushing back on how high the price of their shows is getting on the resale market. And so they're trying to cap the resale market. So that might hurt StubHub. That hurts SeatGeek.
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And also Ticketmaster. Taylor Swift, right, was the poster child for that. She was very unhappy to see how much her fans were having to pay on the secondary market. Look, on top of all of that, there were a couple other things that caught my eye. John, I know that you had some perspective on this, too, as we were digging into the IPO filing here. Number one is a topic that we come back to a lot, which is just how much control of this company the founder and CEO Eric Baker will have. Eric owns about 10% of the company, 10% of the economics. But when you read the language in this filing, it's clear that he's going to have control. Going to read the language here, folks. It says, immediately following this offering, all outstanding shares of our Class B common stock will be held by our founder and CEO Eric Baker. And as a result, he will have the ability to control the outcome of any act action requiring the general approval of our stockholders, which includes, John, stuff like doing mergers and acquisitions, the election of the board of directors. We're going to talk a lot more about this issue, actually, in the next segment, so stay tuned. But, you know, this company's going public, but control still stays with the founder. That's number one. Number two caught my eye. The profit profile of Star Pub has actually been declining. If you look at what happened in 2004, profit was down to 300, was down to $300 million from 350 the previous year. And the amount that this company spends on marketing is astronomical. It's been $830 million on marketing in 2024. It seems to need to do that to gain share. And related to that, the business did end last year with $2.3 billion in debt. Right. So 300 million ish of profit to $2.3 billion in debt. The reason it's going public, one of the reasons is to get $800 million to pay down that debt. Get it to about 1.5 billion. Still five times levered. Those of you who geek out on these things the way I do, that's still a lot of leverage for this business. Final thought, if this company does in fact trade at the midpoint of its pricing range, that would value the business at 30 times 2024. EBITDA, a measure of profit. John, Live Nation. In comparison, the giant the Goliath trades at about 17 times on an equivalent basis. Now, one of the things that we've seen is that share prices have actually popped right after IPO above their trading prices lately, which means that valuation goes even higher. So I've got to tell you on this one, it's oversubscribed, right? What did we say it was? 20 times? 20 times. I don't understand why, to be perfectly honest. Not investment advice, one person's view. But that's our take on it. We're going to keep following this one because a stub Pub one has its IPO on Wednesday. We'll report back on how it trades. And number two, as we move through the year and see its earnings, it's going to be another way of testing, another barometer for how consumer spending is going. Are they spending on services? Are they spending on entertainment? Over stuff? What does that mean for things like retail? So we're going to keep watching. Let's take a quick break. But when we come back, when you buy shares, does your money buy you any? Say, John, we have a question from the audience.
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That's right. Taylor in Indianapolis wrote in and I listened to your Thursday episode on the Murdoch family fight over control of News Corporation and Fox. I looked at public company control over the weekend and one term that kept coming up was dual class shares. What is that?
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Thank you, Taylor. This is such a timely question because as we just heard in the conversation over StubHub, the issue of who controls public companies is top of mind right now. Now, normally when you buy stock in a company, you're getting two things. One is a piece of its profits and the other is a vote in how it's run. The simpler standard is one share, one vote. But with dual class shares, a company issues two or sometimes even more types of stock. And they might look identical in terms of the money or the price of economic ownership, but they do not carry the same voting power. One class might give you 10 votes per share, while another class gives you just one or even none. Take Alphabet, the parent company of Google. Its market cap, by the way, hit $3 trillion today. It has three different share classes, class A shares which trade under the ticket googl. And this gives investors one vote per share. These are shares you and I can go buy with our brokerage account. Class C shares trade under ticker goog. These are purely an economic stake. We can also buy and sell these with our brokerage accounts too, and are in theory cheaper than class A shares because there's no voting rights at all with these none. Then there are class B shares which don't trade publicly. You and I have no way to get hold of these. Class B shares belong mostly to the founders and insiders. And each class b share carries 10. That's 10 votes. Votes. Now the Google founders page and Brin, plus other insiders, that's executive officers and board directors hold over 90% of the class B voting stock in Alphabet. So even though they don't own a majority of the total stock, they control over 50% of the total voting power. That's class A plus class B votes counted all together. Now this structure means that founders keep decision making power while still tapping public market for capital. So the next time you see dual class shares, think of it as two flavors of ownership. One for control, one for bringing in cash and for capital. Now critics say dual class shares undermine shareholder democracy. You can invest, but you don't really get a voice. Supporters argue that it shields visionary leaders from short term market pressures, allowing them to think long term. This, by the way, is exactly Elon Musk's argument on why the Tesla board has just proposed a $1 trillion pay package that gets them a path to more st and control over time. Over and above. By the way, the $1 billion we saw in the news today that he just used to buy shares out of his own cash.
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Thank you, Taylor. And if you have a question for Ann, send an email or Voice memo to brewmarketshoworningbrew.com It's 4pm on the east coast.
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The markets have closed and we don't have A ticker tape, but we're going to throw it over to our human ticker. John.
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That's right. The S&P 500 was up nearly half a percent today. The Dow ticked up a tenth of a percent and the NASDAQ was up nearly 1%. Some market headlines, Shares in Alaska Airlines, which as a passenger has my loyalty, dipped as much as 6% today after the airline lowered its guidance citing higher fuel costs. Shares in Tesla were up as much as 5% this afternoon after a report that CEO Elon Musk purchased $1 billion of company stock last week, his first open market purchase of Tesla since February 2020. And finally, Oracle stock price was up as much as 3% today after reports of a TikTok deal between the US and China. While a US buyer of TikTok has not been named, Oracle has emerged as a top contender to acquire the social media app.
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Just a final thought on that. Absolutely extraordinary what's going on right now and how Oracle seems to be in the mix for so many things, from the TikTok bid or trying to find a solution for TikTok to what's going on with OpenAI and its participation in Project Stargate. Now, just wanted to lay out what's going on this week. Trade talks between the US And China have been underway. And we mentioned last week that we've known this has been going on, but it's not been getting quite as much coverage. Now, there was news today that the US And China have reached a quote framework deal for Tick Tock. This is what SEC Treasury Secretary Scott Bessant said from Madrid, where discussions are happening. Now. Just to recap a little bit, this Wednesday, it's not only the Stop Hub IPO, it's meant to be the deadline for ByteDance, which is tick Tock's parent company, to either sell the US Business or have it potentially shut down. And apparently this Friday, it's going to be the big day when President Donald Trump and Chinese President Xi Jinping will meet to discuss the terms. Now, we just want to refer you back to our Labor Day special, which was an interview that I had with Kevin O', Leary, the entrepreneur, you may remember him as Mr. Wonderful and Shark Tank. And he is one of the folks who's been circling TikTok to try and buy it. He genuinely believes that Tick Tock would be allowed to just be switched off if a deal isn't met. So you've got different schools of thought on this. We're getting news today that there could be a deal you've got others saying, well, President Trump will let it go. So keep watching this one. We're going to keep watching this one. I did take a quick look at social media stocks today. I took a look at meta up on other news. I took a look at snap up very slightly. So there's going to be noise around this one but we're going to do both. We're going to keep tracking social media stocks as we keep as we keep tracking this TikTok news. That's it, folks for today's Brew Markets Daily.
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And Brew Markets Daily is hosted by Ann Berry and produced by John Croteau, Tarek Abdelatif and Emily Milian. Our technical director is Felicia Edwards and Brittany Dottocco runs audio. The president of Morning Brew Inc. Is Devin Emery.
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Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. We'll see you back here tomorrow, folks, same time, same place. Sam.