Four takeaways from Pony AI’s IPO filing

Toyota-backed autonomous vehicle company Pony AI has joined the list of Chinese firms going public on the U.S. stock market after a multi-year ban from Beijing on offshore capital raising. 

Zeekr, a luxury Chinese electric vehicle startup, debuted on the New York Stock Exchange in May, and WeRide, another AV startup, also hopes to file an IPO in the U.S. this year at a $5 billion valuation, but its plans have been delayed as of August. 

Pony was valued at $8.5 billion when it raised capital in 2022. Toyota participated in that round as a follow-on investor after injecting the startup with $400 million in 2020, per PitchBook data. The Japanese automaker’s stake in Pony is at 13.4%. The Chinese AV startup has since secured $100 million from Saudi Arabia’s NEOM in 2023, and $27 million from Chinese VC GAC Capital in October.

But the filing to go public reveals that Pony’s board of directors recently slashed the minimum valuation for its IPO down to $4 billion. Pony also dropped its minimum target for what it wants to raise in the transaction from $425 million to just $200 million.

That’s not all that stood out in Pony’s IPO filing, though, so here are our top four takeaways. 

Modest fleet and operations

IPO filings are chock full of numbers that were either previously obscure or lacking context, and Pony’s is no exception. 

The company says it operates a fleet of 190 “robotrucks” in Beijing and Guangzhou, and over 250 robotaxis in Beijing, Guangzhou, Shenzhen, and Shanghai. It can charge for robotaxi fares in the first three cities, and is fully driverless in Guangzhou and Shenzhen. 

On the robotaxi side, Pony says it receives an average of 15 daily orders per robotaxi from the 220,000 registered users on the PonyPilot app. Overall it says it has accumulated more than 20 million “autonomous driving miles,” though just 2.4 million of those had no human driver behind the wheel.  

Pony complements its robotaxi service with a growing robotruck business. It says it has already acquired 57 corporate customers – accounting for 73% of total revenue in the first half of this year. But the majority of that money is coming from Pony’s top three customers, who generated 62.8% of total revenues during the same period. 

Revenue up and to the right? 

It’s no secret autonomous vehicles are a pricey business. And while Pony says it generated gross profits of $32 million and $17 million in 2022 and 2023, respectively, the company lost more than $270 million over those years.

A huge driver of those losses has been Pony’s R&D spend. Understandable, given that Pony is a company developing pioneer technology, involving an extremely sensor-heavy autonomous stack. But we wonder when Pony is going to really prioritize operations over R&D. As of June 30, the startup’s workforce of around 1,300 employees is 44% R&D, 16% technology deployment and production, and only 28.5% operations. It spent $73 million on R&D employee salaries alone in 2023 and finished the first half of this year with $335 million in cash. 

Pony projects it will bring in a lot more money in the coming years, especially as robotaxi fares increase. But it sounds less optimistic about bringing the costs down, because in the filing it does not say it expects the cost of that revenue to decrease over time – only that those costs will “continue to evolve in the near future.”

Now, Pony’s revenue did nearly double to $24.7 million in the first half of 2024 when compared to the same period last year. It has also pared its losses year-over-year in the first half. But while it looks like Pony’s revenue is going up and to the right if we look only at the first half of the year, the company still has a long way to go if it hopes to beat 2023’s total revenue of $71.9 million. 

SIXTY. PAGES. OF. RISK.

Every company needs to lay out the risks associated with the business when they go public. But damn it all if Pony wasn’t incredibly thorough with 60 pages worth of disclaimers. 

One of its main risks? It’s coming off a shortage of sufficiently skilled staff with knowledge of U.S. GAAP (Generally Accepted Accounting Principles) to ensure proper compliance with SEC requirements. 

While Pony says it has fixed this weakness as of the end of 2023, there is very recent evidence that shows how real a risk this can be to a young business in Fisker. That EV startup’s nosedive into bankruptcy was, in large part, triggered by it missing the deadline to file its third-quarter financial results last year.

There’s also the old People’s Republic of China conundrum – something Zeekr is familiar with. We’ll let Pony say it: “The PRC regulatory authorities have significant oversight over our business and may influence our operations as they deem appropriate to further economic, regulatory, political and societal goals.”

Moving on, Pony included a slight risk of not being able to continue its extremely limited robotaxi testing in the U.S. due to impending regulations against Chinese connected vehicles. The startup has a permit to test AVs with a driver behind the wheel in California, but it says its operations in the U.S. generated “less than 1% of our total revenues in 2023 and the six months ended June 30, 2024.”

Pony paints a pretty picture

We are now a few years removed from the special purpose acquisition merger craze that allowed startups to make outrageous projections about their businesses. Remember when Faraday Future projected it would sell more than 100,000 EVs in 2024? It’s sold roughly 13 to date.

This is a traditional IPO, so Pony doesn’t have nearly as much license to be so unhinged with its projections. Still, Pony indulges in some self-flattering imagery of what its technology is capable of that we’d be remiss not to share with you.

“On the public roads of China’s metropolises, Pony has achieved what was once only depicted in science fiction — building a car that drives itself,” the company writes. “Passengers, wide-eyed with wonder, unlock the door using the app and climb into the back seat.”

“Stepping out of the car, the passengers pay the fare through the app and conclude this awe-inspiring ride. Meanwhile, the robotaxi drives itself away to pick up the next passenger, leaving one to ponder what other marvels the future holds.”

Wide-eyed, indeed.