Sonos Fails To Reach Valuation Target As Shares Rise On Listing
They were hoping for a valuation of between A$3B and A$4 billion but even after their shares opened higher last night the US sound Company now only has an implied value of US$1.9billion.
The big problem for Sonos, a Company that has not made a profit in the past, is that they have to report quarterly, and this could well see the sound brand’s slump going forward as they face stiff competition and a market already saturated with Sonos sound systems.
Sonos shares opened at US$16.00, just 7 percent higher than the $15 initial selling price. The stock’s closing price of $19.91 gives Sonos an implied market value of about $1.95 billion.
The stock trades on the Nasdaq under the ticker symbol “SONO.” Ironically one of Sonos’s arch rivals Apple became the world’s first trillion-dollar Company on the same day.
Sonos introduced its first voice-enabled speaker, the Sonos One, late last year, it is having to compete up against several superior sound systems including the Amazon Echo Pro.
The company’s initial SEC filing revealed a critical flaw in its business model, which subjects it to Amazon’s whims on what the internet giant decides to do with its Alexa voice recognition technology. Sonos has said it plans to incorporate Google’s Assistant in its products too.
Observers claim that it was important for the company to distance itself from Fitbit and GoPro two CE Companies whose stock as suffered.
Sonos is off to a lacklustre start: Its public market value falls short of the original IPO valuation that the company was targeting in April.
Bloomberg claimed that the failure to reach their valuation target shows there are some key questions on the minds of investors: Will customers upgrade to the latest device even if a product is so sticky that they don’t think they need a new model? If they don’t, where will growth come from? And how do you head off copycats?
Being the industry trailblazer didn’t guarantee success for GoPro, which is down 75 percent from its 2014 IPO, or for Fitbit, which has fallen 70 percent from its 2015 listing.
Toni Sacconaghi, an analyst with Sanford C. Bernstein & Co in New York where Sonos listed wrote “A great product does not always make for a great business. Our analysis indicates that over the last 20 years, there have been virtually no historical precedents for consumer hardware companies enjoying significant operating leverage, even during stages of high growth.”
Sonos lost $14.2 million for the year ended Sept. 30 on revenue of $992.5 million, according to their prospectus.
The company said that it may not reach or sustain profitability and expects operating expenses to increase as it increases investment in areas including sales and research and development.