Saturday, March 26, 2016

"It Is Obvious FT Alphaville Does Not Understand Rocket Internet (RKET:GR)"

That was our headline story a year ago today.
Rocket is the little Berlin-hipster corporate-knockoff-making machine that thinks of itself as an incubator and says stuff like:

"Our proven winners generated aggregated net losses of €442 million" ($568 million)
-Rocket Internet prospectus via "How Do You Say 'Dot-Com Crash' in German?"

And they get no love from FTAV.
 Proven winners, bub.
The stock was down 5.83% on Thursday, to 23.14 euros.

Here's the latest, from Bloomberg Gadfly:

Ground Control to Rocket Internet
Rocket Internet needs to embrace the fact it's a venture capital firm at heart, not an internet business, if it's to win back investor confidence.

When the company went public in October 2014, founder Oliver Samwer pitched Rocket as an "operating platform company" that used its expertise to build e-commerce and financial technology start-ups in emerging markets.

But from the outset, the Berlin-based company has faced criticism it's opaque, overly complex, and difficult to value. With its shares down more than 40 percent since the IPO, Rocket needs to embrace change.

It could start by explaining what it actually is. While Rocket's founders describe it as a start-up incubator with 250 engineers who bring technical know-how to its companies, its model resembles that of a venture capital fund that happens to be publicly traded.

Rocket backs dozens of young firms in the hopes that within ten years one or two of them turn into profitable businesses. It only makes big money when those stars are sold or taken public. If the company had emphasized that it operates like a venture fund, some of the current disillusionment among investors might have been avoided.

Secondly, Rocket needs to do a better job of explaining how it values its investments. Shareholders are clearly skeptical of the valuations the company ascribes to its assets: based on its November valuation of 6.06 billion euros ($6.8 billion), the company trades at a 35 percent discount to its portfolio.

The company has 140 fully consolidated subsidiaries, 330 others, and dozens of legal entities to account for, according to its 2014 annual report. It discloses sales and other metrics for only 13 of its companies, those it dubs "proven winners." The biggest of them are Global Fashion Group, a largely Russian and Latin American e-commerce company, and Delivery Hero, which brings food to your door.

Rocket devises a "last portfolio value" a few times a year for each of its companies based on what outside investors pay to buy a stake in those businesses. More transparency around that process would help persuade investors of those valuations....MORE
We've been checking in on Rocket since 2014's "Climateer Line of the Day: Venture Capital Economy Edition" which had the prospectus quote.
FT Alphaville has many more mentions, usually in connection with Rocket's financials or the food takeaway business.