[ChuckMcM]

Sigh

"The 5-mile test track is estimated to cost about $100 million, which Hyperloop Transportation Technologies hopes to pay for with its initial public offering (IPO) later this year, according to Navigant's blog."

Run away, run far far away. They might as well do a kickstarter. Seriously, what sort of "business" is a 5 mile test track?

Lets say you charged $25 for a "5 minute ride on the hyperloop!" and you got 8 people in it, and you had perfect efficiency, and you ran non-stop for 10 hrs a day, 7 days a week then $100M is 414 days. And that isn't including the cost of running the ride in the first place. I guess I'll find out why they think I should think about investing in their S-1 but for right now, I am totally not seeing it.

[jonknee]

Well obviously the end goal for Hyperloop Transportation Technologies isn't to run a 5-mile test track amusement park. It's a test track, quite simply a test to work out the kinks and try and make hyperloop a real thing. It almost certainly won't work, but at scale it would be big dollar territory (California's high speed rail effort alone is $68 billion and China is spending many times that).

[pavlov]

As an IPO this sounds similar to most biotech/pharma startups. These companies routinely IPO in the $50-100 million range when all they have is a patent, some promising data but no approved clinical trials and no business.

Of course it's different because there's a clear post-IPO acquisition market for biotechs. Not quite as clear who would buy Hyperloop if it's proven to work...

[bliti]

It seems to be related to how startups are suddenly valuated at billions without much of a moat or intrinsic value. Just for having "users".

[minot]

Meh. If I give you $100 for a 1*10^-6% stake in your company with a guarantee that you will pay me back at least $100 before honoring any other debts or issue, are you really a ten billion dollar startup?

[zaroth]

It's most entertaining to subtract any preference off the top of the valuation. I wish it became a trend. Particularly for preferences with multipliers!

[digikata]

The purpose would be to learn more about the inevitable practical problems that come up between a system concept that pencils out to be more efficient and a real operating system. I think we stand on the shoulders of giants giving an incredible science and tech foundation to work upon. However, all that knowledge can give us a false sense of how difficult it is to cross into unknown territory (e.g. when assembling a new system from well understood elements, like hyperloop).

[ChuckMcM]

I understand the purpose, but what I don't understand yet is why would you ask retail investors to fund it at this level of risk? Remember, these guys aren't associated with Musk in any way [1], they are just taking the ball and running with it. So huge risk, probably going to flame out, very small chance they become the folks with the 'expertise' in building Hyperloop type systems and thus the primary engineering contractor for building them.

Since they aren't one of the big engineering infrastructure companies (Halliburton, Bechtel, Etc.) its unclear what they can do if they run into hiccups (like say nobody can fabricate the parts they need).

So do a $100M series A? Sure I could see that, a collection of billionaires wishing to bet on them making something that can work, but we should have trained people in the 90's to not buy stock in companies that have no hope of revenue in the forseeable future. (and say what you will of the recent Tech IPO's they have all had revenue)

[1] "Now, the company Hyperloop Transportation Technologies Inc. (which is not affiliated with Musk or Tesla) has inked a deal with landowners in central California to build the world's first Hyperloop test track"

[digikata]

As long as the investment context is disclosed, why shouldn't there be long range, high-risk investments available in the market to interested buyers?

Edit: I agree with you that the risk is very, very high. But, it at least gives a non-zero potential for investment return - which on that level is better than, say, Kickstarter.

[ChuckMcM]

This statement : "why shouldn't there be long range, high-risk investments available in the market to interested buyers?"

Implies that they are not, and it is not true. Long range, high risk investments are available to any interested buyer.

Generally the challenge that comes up is that the SEC has set standards for someone to meet in order to be a "qualified" investor. Some people interpret those standards as a way of "keeping people out" of investing, but that is not the case. They are there for two reasons, one so that when those people lose all of their investment they aren't "damaged" and more importantly so that unscrupulous sales people cannot dupe people who are unable to distinguish risk for themselves into investing.

So I understand when a smart person who is chafing under the restriction of not being qualified from preventing them from a certain investment. But they have to realize that they are not the ones being protected. The elderly who are being promised a "guaranteed" 20% return on the last of their life savings by a boiler room broker, they are being protected.

Further, qualifying, is simply a matter of building up your portfolio to demonstrate you have the knowledge and presence of mind to make those decisions and if they go badly you knew the risks. The youngest person I've met who was a qualified investor was one pretty much right out of high school. He had started with $5,000 in a Charles Schwab account (his college fund) and moved it over to E-Trade when it was at $30,000 and was over a million about a year after he had graduated high school. He read a lot, developed a much deeper understanding of finance than I will probably ever have, and showed me just what was possible for someone determined to get there. Nearly every day there are stocks that move up by more than a few percent, and if you can anticipate that movement more often than not you can move a portfolio along.

And I would have no trouble whatsoever with these guys on a road show trying to drum up investment. And as I've said I'll read their S-1 with interest. I would not want them to do this raise on the general market because that opens up defenseless people to get hurt by folks who just want to push shares.

[digikata]

I'm no expert in this area, but when you mention qualified investors, I think you're describing private investment where qualified investors are required because those investments otherwise have a much lower bar of disclosure and analysis. The thought is investors there need additional protection and if you're qualified you can fend for yourself.

On the public market, the disclosure requirements are much higher, and you're more likely to find analysis, public articles and reports or other analysis you can buy. As far as I know, there's no qualified investor provision for buying stocks on the public market. In the end you can personally wish this company doesn't offer an IPO, but I don't think there's any systematic rule that prevents it as long as they file all the required disclosures and find a financial firm willing to do the administrative work of putting the shares on the public market. (Again though I'm no expert here... so it would be interesting to learn more.)

On the public market, one could class many tech companies in the long-term, high risk, show little to no profit category.

[ChuckMcM]

I think you've got a good understanding of it the difference between qualified an non-qualified.

The disclosure requirements will, I believe, kill any chance HLT has for doing an IPO. I would worry if they were able to get past that hurdle.

My response was more for people who complain they can't invest in pre-ipo companies when they don't meet the qualified investor criteria.

[danielweber]

Selling an unready product to retail investors indicates more of a desire to pay themselves six figure dalaires for 5 years and then somberly declare the thing a failure.

[stephengillie]

This reminds me of the Seattle Monorail, which continues to operate today. For a few dollars, you can ride swiftly and smoothly from one part of Downtown Seattle to another part of Downtown Seattle.

Some day, scientists hope, the value of the monorail will be seen. That day, we expect to extend the rail line to other communities. Meanwhile, we just pulled a tunneling machine out of its boring hole, continue to expand the Link Light Rail system, and are developing various trolley-based solutions such as the ones in South Lake Union and First Hill.

[Shivetya]

oh, that 600 million dollar per mile tunnel?

not a great use of transportation dollars, think of how many EV buses they could buy, which on the whole buses tend to go where people want and do it more often than light rail which not only costs a fortune to build but maintain as well

[stephengillie]

We had a mayor (McGinn) that wanted to connect neighborhoods with light rail and trolleys. We voted him out to get the crazy tunnel plan. And after spending all this money, we're going ahead with light rail and trolleys.

Everyone's been hearing about Bertha and the tunnel calamity, but almost nobody's heard about the trolley that connects 6 neighborhoods, was installed in about 6 months, and it's already done.

[goodcanadian]

I won't defend that project specifically because I know nothing about it, but I would like to offer a couple of comments:

As a passenger, I have always found the experience of riding rail to be far superior to riding a bus for a lot of reasons including but not limited to speed and comfort.

A train generally has much higher capacity than buses, and if well utilised, a lower operating cost per passenger. An ideal transport system will use trains for the high traffic trunk routes and a tightly integrated bus system as feeders for the train line. It should never be expressed as an either/or proposition. Both are necessary.

[stephengillie]

When traveling from Seattle to LA, Greyhound buses are better than Amtrak trains for several reasons: faster, cheaper, easier to book, and less risk of Civil Asset Forfeiture.

[goodcanadian]

Amtrak does not qualify as a proper rail system . . . besides, the comment was clearly referring to municipal transit. For Seattle to LA, I can't imagine any rail system ever beating flying.

[danielweber]

http://en.wikipedia.org/wiki/Detroit_People_Mover

[pbreit]

You should not. But a lot of (more positively thinking) people might like the risk/reward. After all, Elon is 4 for 4 in making people fabulously wealthy off very-hard-to-do projects (I know he's not officially involved but some of his people are like Sacks and Pishevar are).

[ChuckMcM]

For me, it isn't a positive / negative thinking thing. What I struggle with is the series of steps that this company goes through which have it justifying a valuation of even $100M (which it won't because nobody IPO's all of the equity, so for a $100M raise they are probably assuming a $1B valuation).

If you have some thoughts on how that would work please share them. I'd like to learn.

I'm guessing (and I will know more when I read their S-1) that they build their test track, they prove out the concept, then win a contract to build a larger one from one of the states? So how far does that $100M get them? Does it get the 5-mile track built and operating? Looking at other complex projects, say the London Eye, which cost $100M in 1999. And it's just a Ferris wheel. I don't know of a 5 mile rail project that has cost less than about half a billion but I would certainly grant you that those tend to be bid on by cost+ contractors.

So I'm just trying to connect the dots on how they "go to market" as it were.

[ropman76]

I want this to succeed. I want to engineering team(s) to crush all the issues that people have raised here and elsewhere. That being said most cutting edge engineering projects like this don't make money for a very long time and I wouldn't invest any money I want to see a return on.

[gargarplex]

$/mi will reduce with scale.

[jacquesm]

That's an interesting one. This is actually contrary to most conventional wisdom regarding such projects, rail for instance does not have a reduced cost / mile if the distances get longer. (Airtravel does, however).

[rhino369]

Presumably for the IP and institutional knowledge that is generated by actually designing a working prototype. Then HTT could propose actually building one with them running the project.

I doubt it will work, but it's not a stupid plan.