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Today’s Trapital episode is a deep dive on StubHub. The company’s initial goal was to bring buyers and sellers together to provide more access to live events. Has the secondary marketplace achieved that goal? The answer is complicated, controversial, and a little crazy. Perfect for a Trapital breakdown! You can listen to me and Tati Cirisano breaks it down here.
In today’s memo, I’ll dig into StubHub’s IPO plans for 2024.
StubHub’s journey from startup to (potential) IPO is a wild story that deserves a TV or film adaptation. It doesn’t need to be an awards contender like The Social Network or The Dropout, but more like Blackberry—a fun movie on Hulu that was better than it honestly needed to be.
This is a story where one co-founder, Eric Baker gets pushed out and starts a competing company, Viagogo, in the UK. Later on, eBay acquires StubHub, then years later sells StubHub to… Viagogo which is still run by Baker! But the deals close weeks before a global pandemic rocks the live events landscape for several years. Now that the industry is back, Baker and the company want to go public. Crazy.
It’s a wild story that’s as much about StubHub as it is about the $8 billion secondary ticketing market for concerts. The resale market shifts the economics for many ticketed live events, but it hits music the hardest since the events are less frequent and intentionally underpriced by the artists.
If you live in LA and want to see LeBron James play, you probably have around 30 chances each year with injuries and load management. If you live in LA and want to see Drake perform, he’ll do four to six shows every three years, and that’s IF they let Aubrey near LA anytime soon.
The frequency isn’t the only factor though, since artists who perform regularly in one spot still have concerts that sell for much higher on secondary markets, like Adele’s residency in Las Vegas.
Ticket pricing is complicated. I broke down why shortly after the Taylor Swift - Ticketmaster fiasco. The secondary market plays a big role in the price that consumers pay (on both primary and secondary outlets). There’s more attention than ever on the space, which puts more pressure on StubHub’s future plans.
two front-row seats to the IPO
In a vacuum, Wall Street should love StubHub.
It’s a marketplace full of scarce, high-demand products. The live events industry has hit record highs despite leaving money on the table (that allows StubHub to thrive). StubHub also owns no inventory and commands a high take rate from both buyers and sellers. It sounds like the intro to a BUY rating from Morningstar.
I see the attraction and I get the IPO push. If I ran StubHub, I would explore going public too.
But we don’t live in a vacuum. We live in a world where regulators are digging into the bots and professional resellers that drive up the prices that consumers pay for tickets. And while a lot of public scrutiny has been placed on primary ticketing platforms like Ticketmaster, it’s StubHub that was recently hit with a D.C. lawsuit over “junk fees.” Plus, StubHub’s massive debt load of $2 billion is nearly six times its 2023 EBITDA. It creates question marks on the company’s ability to pay that off.
It’s enough to give investors pause given StubHub’s valuation target of $16.5 billion. Some believe that number should be cut in half, especially in the 2024 IPO market where companies like Stripe are still waiting to go public.
The blessing (and curse) for StubHub is that the rest of the live events business is maximizing the moment. DICE is rumored to receive a large investment from a private equity firm. SeatGeek has its own 2024 IPO plans, and Live Nation sets a new revenue record every quarter.
It builds confidence in the industry but gives investors other options to capture growth with fewer concerns facing the company. If any policymaker forces a cap on ticket resale or a reduction on junk fees, it eats into StubHub’s margin.
We’ll pause it here, but if you liked this you should listen to the full episode with Tati and me. We also covered.
- the origin story: why Eric Baker and Jeff Fluhr launched StubHub
- the StubHub-eBay relationship over time
- when the New England Patriots sued StubHub
- we debate whether resale ticket prices should be capped
Chartmetric Stat of the Week - “Not Like Us”
As of August 5, Drake's Spotify monthly listeners are at 74.6 million, which is the lowest it has been in the past six months and now less than Kendrick Lamar, who has 75.2 million. Drake has always been seen as the commercial machine in hip-hop. But at the moment, it's his rival Kendrick who has won the beef and has a few more people behind him on Spotify.
This memo is presented by State Farm.
When you start a new business, your first reaction might be to say things like “Woohoo!” or “Yessss! or “boo-yah!” But one thing to say that could be a huge help is:
Like a good neighbor, State Farm is there.
And just like that, State Farm will be there with the coverage that fits your needs, whether your business is growing, or just opened its doors.
State Farm agents are small business owners too, so they know what it takes. They can help you create an insurance plan that fits your small business needs and budget. With State Farm, you can worry less about the unexpected and focus more on your business. With a State Farm agent you know someone is helping you achieve your goals.
Just say…Like a good neighbor, State Farm is there.
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