Are You Ready for Waymo Stock IPO?
Are you ready to trust a robot with your life? Waymo is betting on yes.
In March 2021, the self-driving vehicle company sought to convert its skeptics by releasing a study that reconstructed every fatal crash in Chandler, Arizona, between 2008 and 2017. It found that its autonomous technology would have avoided or mitigated crashes in 88 out of 91 total simulations.
Of course, simulations and real-world results are two very different things in the minds of most consumers. With Waymo expanding its self-driving services and parent company Alphabet opening the door to the idea of an IPO, let’s check in on the bull and bear cases of whether you’d want to own a Waymo IPO.
What is Waymo?
Waymo is a self-driving technology startup currently owned by Alphabet. Waymo was launched by Stanford professor Sebastian Thrun and utilized the technology from co-founder Anthony Levandowski’s Ghost Rider motorcycle. With a decade of operations and 20 million miles driven on public roads, Waymo has first-mover advantage in the next big thing in transportation. Waymo stock is currently a subsidiary of Alphabet, but after the search giant opened the company to private external funding, investors are asking if an IPO is next.
Expected IPO Date:
No announced date.
- High growth: The global autonomous vehicle market is expected to grow 40% per year, to a $557 billion industry by 2026, according to Allied Market Research.
- High barriers to entry: The degree of technological know-how to bring autonomous vehicles to market ensures new entrants will be significantly limited, allowing a monopolistic or oligopolistic industry.
- Regulatory: The automotive industry is heavily regulated and will require significant buy-in from governments and a supportive framework for growth.
- Competition: Waymo faces competition from powerful incumbents ranging from tech companies like Apple and Amazon to automakers like General Motors and Tesla.
- Headline/Adoption risk: Adoption could be affected in the event of a high-profile failure or an autonomous vehicle hack.
News & Analysis
Waymo: 5 Facts to Know Before the IPO
The self-driving race is on. While Waymo hasn’t announced an IPO, if you’re an investor looking for the best stocks in the self-driving space, it’s definitely a company you want to keep an eye on. Here are five facts about Waymo that should be at the front of every investors’ mind:
- 20 Million: The number of miles on public roads Waymo announced its cars had covered as of January 2020. Importantly, Waymo referenced that it took a decade to reach its first 10 million miles, but only a single year to add on another 10 million miles.
- 6.1 million: The number of miles driven by Waymo’s self-driving fleet of cars in the Phoenix metro area as of September 2020. The cars were engaged in 18 “contact events.” Waymo notes “nearly all” the events were the fault of the other driver and none led to serious injury.
- $30 billion: Waymo’s valuation as of March 2020.
- 30,000: The number of lives that self-driving cars could potentially save in the U.S. every single year.
- $1 trillion: Researcher ARK Investments’ projection of ride-hailing industry profits by 2030.
Bull Case: Why Would You Want to Buy Waymo Stock?
What do Cornelius Vanderbilt, Henry Ford, and John D. Rockefeller have in common? Besides being extraordinarily rich, they all made their fortunes investing in the evolution of transportation.
Some industries will fade away — transportation is not among them. There will always be a need to transport humans and goods more conveniently and investors are always looking for the next big thing in transportation.
Increasingly, the evolution in human transportation isn’t a new method of travel (admittedly, commercial space rockets are really cool though) and instead is, well, less human. That’s right, autonomous vehicles are destined to change the future of travel.
And the future is sooner than you think. Most investors assume self-driving technology is a binary event, but it’s a gradient and likely your next car has some features already per the levels below. Advanced driver assistance systems – Levels 1-4 — are expected to grow 19% per year to a $67 billion market by 2025.
- Level 1: Driver assistance features cruise control and blind-spot monitoring
- Level 2: Partial automation features lane awareness and adaptive acceleration/braking.
- Level 3: Conditional automated features like self-parking and lane changing.
- Level 4: Full self-driving with limited human oversight.
- Level 5: Full operation with no driver presence necessary.
Of course, the real money will be in the race to Level 5 autonomous. Technology and automotive companies are spending significant money in getting their technology to this level because it’s destined to be a huge market: some estimates show sales of autonomous vehicles reaching $557 billion by 2026.
However, only a chosen few will be able to compete in this market. Competition is fierce and billions are on the line. In fact, Waymo co-founder Anthony Levandowski was sentenced for stealing trade secrets when leaving the company for Uber.
There are dozens of tech and automotive companies vying to win market share in the self-driving car race. While all should benefit from the increase in self-driving technology, few will be able to match the scale, depth, and technological expertise to currently compete with Alphabet’s Waymo and shape the industry.
Waymo’s first-mover advantage — owing to its decade-plus of self-driving research and development, its extensive work on mapping through its Google Maps, and the more than 20 million miles driven on public roads across 25 cities — place it in prime position to benefit from the next big thing in transportation.
Bear Case: Why Would You Want to Avoid Waymo Stock?
With any new technology, there are significant risks for Waymo. Tech companies haven’t been able to disrupt heavily regulated industries like medical and finance to the same level as lighter-touch industries like social media and ecommerce.
The Silicon Valley ethos of “move fast and break things” will have to convince a skeptical Washington and state governments before Level 5 technology is approved on a nationwide scale.
To date, Waymo has played nice with regulators on both the federal and state levels, including forming a durable partnership with the state of Arizona where it offers and offers the Waymo One self-driving taxi service in the greater Phoenix area.
Still, that hasn’t stopped some technology and automotive companies from moving quickly. Notably, Tesla has adopted an aggressive stance versus regulators, pushing out self-driving features to its existing fleet and marketing the technology as such despite requiring a level of driver oversight.
The entire industry faced a black eye and calls for more regulation in the 2020 NTSB ruling that Tesla’s autopilot was the cause of a fatal 2018 Model X crash. Headline risk is always a concern and high-profile events, fairly or not, will continue to dampen adoption demand.
At the same time, there’s risk that Waymo’s conservative rollout could negate its first mover and technological advantages. To date, Waymo appears to be losing ground in the space. As the Financial Times reported, in 2018 the company confidently forecast building a self-driving fleet that included up to 20,000 Jaguars within the first two years of production and later added a goal of up to 62,000 Chrysler minivans by “late 2018.”
As of January 2021, Waymo only reported an official fleet size of 600 and the CEO wasn’t quite sure if the business model would be a fully scaled operational taxi fleet or licensing the technology to automakers for inclusion in their vehicle models.
These missed deadlines and questions about the monetization model led Morgan Stanley to cut its valuation estimate to $105 billion, 40% lower than its prior $175 billion estimate. Later the company raised its first round of investment from outside investors at an even stingier valuation of only $30 billion.
Look for the competition to get fiercer going forward with heavyweights spending significant money in the autonomous vehicle race. After paying $1 billion for a majority stake in Cruise Automation, General Motors announced Cruise acquired Voyage, a retirement community self-driving startup, in March 2021.
Apple’s rumored self-driving car made headlines in February 2021 when it was leaked the company approached Hyundai-Kia to manufacture its self-driving concept with a production date of 2024.
When Can I Buy Waymo Stock?
Waymo remains private but if you own Alphabet stock you benefit from Waymo’s growth. The company remains a subsidiary of Alphabet and the financial information is reported in Alphabet’s “other bets” section where it operates a portfolio of high-tech startup companies.
The company is notoriously secretive about its ownership percentage. But due to the fact it consolidates the company on its balance sheet, it must have “significant control,” per generally accepted accounting principles rules, which is typically considered more than 50%. According to public announcements, Alphabet has a significantly higher ownership percentage than that figure.
Because Alphabet controls Waymo stock, they will determine when to spin off the company and file for an IPO. Until recently, most investors weren’t watching closely for a Waymo spin-off as Alphabet has maintained tight control over its most high-upside “other bets.”
However, recent pressure may have played a factor in Alphabet’s decision to take external funding and seemingly put Waymo on a path towards an IPO.
The company has been faulted for spending lavishly on non-core businesses and high-risk startups. Critics correctly point out undisciplined spending in this division offsets the gains from its core Google division, which generates substantial profit margins.
In a nod to the fiscally conservative shareholders, Alphabet hired Ruth Porat as CFO in 2015 based on her reputation as a fierce expense controller. The company has since taken strides to control expenses in recent years. In addition to taking outside investment for Waymo, Alphabet shuttered its internet balloon company Loon based on the company’s lack of commercial viability.
If Waymo is in need of a cash infusion to fund a nationwide rollout or Alphabet faces pressure to show investors its “other bets” section is creating economic value, an IPO makes sense as it would allow Alphabet to cash in and still retain a meaningful percentage of ownership.
The next blockbuster IPO?
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There’s a company that “called” these businesses long before they hit it big. They first recommended Netflix in 2004 at $1.85 per share, Amazon in 2002 at $15.31 per share, and Apple back in the iPod Shuffle era at $4.97 per share. Take a look where they are now.
That company: The Motley Fool.
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Waymo Stock: Who Owns It Now?
Unless you meet stringent requirements for net worth (more than $1 million – excluding your home) or earnings ($200k/year for two years, $300k for married couples) – you do not meet the accreditation levels set by the SEC and are not allowed to purchase Waymo stock.
Even if you meet those standards, good luck in locating those shares before the company goes public because Alphabet has only taken outside money once in Waymo’s history.
Despite being majority-owned by a public company, as a private company Waymo is under no obligation to disclose its investors to the public and Waymo mostly chooses not to do so. For private companies, information released to the public is often scarce and incomplete and should be heavily scrutinized.
As a perfect example, Morgan Stanley once estimated Waymo was worth $175 billion; reports were the company took outside funding at a $30 billion valuation less than 18 months later.
Multiple outlets confirmed Waymo’s first outside round of outside funding raised $2.25 billion in outside funding from Silicon Valley heavyweights Andreesen Horowitz, Silver Lake; governmental pension bodies like the Canada Pension Plan; and even public companies like Magna International and AutoNation. Per the public terms of the deal, outside ownership of Waymo stock is approximately 7.5% total.
With a list of backers like this, it’s understandable why normal mom-and-pop investors are impatiently waiting to buy Waymo stock once the IPO occurs.
What is Waymo’s Stock Symbol?
Private companies do not have stock symbols. Stock symbols are only for public companies that have many individual investors and trade on public exchanges. This allows investors to quickly check their daily gains or losses amid a sea of other tickers.
When Waymo eventually decides to file for an IPO, here’s a list of symbols that will be available for it to adopt.
- SLFD (Self-Driving)
Waymo Stock: Should You Buy the IPO?
It’s difficult to make a bullish or a bearish case to invest in a company without knowing the key risk factors laid out in S-1 registration statements or the financial information commonplace with Securities and Exchange Commission filings.
We’re also in the dark on the valuation Waymo would seek when it eventually comes public. As stated above, this can be a difficult undertaking for even Wall Street analysts — they overestimated Waymo’s value by 82%! For those reasons, it’s not advisable to form an investment thesis until we have more data.
That said, we do have some information that is helpful to form our thesis. The company was valued at $30 billion last year and has been in existence for nearly a decade. Waymo is receiving revenue through its Waymo One ride-sharing service, but wide-scale commercial viability is not guaranteed.
Judging by its slower-than-expected rollout and potential business model change, it’s possible the ride-hailing market is less lucrative than initially expected or Waymo needs the type of scale and investment that currently makes this pursuit non-profitable at this juncture.
A bet on Waymo was always a bet on the future. Its technology in the self-driving space is second-to-none and it has optionality in the form of creating a self-driving fleet of taxis like it has in the metro Phoenix area, pairing with automakers to license the technology, or both.
At the same time, Waymo is at risk of losing its first-mover status as a market leader, most notably from an aggressive Tesla. Additionally, automakers like General Motors are snapping up self-driving companies quickly to improve their offerings. Finally, tech giants with significant resources like Amazon and Apple will be formidable if this is a highly profitable industry.
Investors will be on the lookout for Waymo’s IPO to answer these questions…if it ever occurs.
Frequently Asked Questions
Is Waymo public?
Waymo is not a publicly-traded company. However, since it is majority-owned by Alphabet, you can effectively own the company by purchasing Alphabet shares.
Does Waymo use NVIDIA?
Waymo uses Intel chips inside its cars to process inputs from sensors and make real-time decisions.
Does Google own Waymo?
Google reorganized as Alphabet, a holding company that Google is now part of. Alphabet owns a majority stake of Waymo, which is part of its “other bets” division.