How to Invest in StubHub Pre-IPO

StubHub is the world's leading marketplace to buy and sell tickets to any live event. The company sells more than 300 million tickets to sporting events, concerts, festivals, and other events in 195 countries each year.

The global ticketing platform had plans to go public in 2022. However, it put them on hold due to challenging conditions in the initial public offering (IPO) market. With market conditions starting to thaw, StubHub again appears to be gearing up for a public market listing that could come within the next year.

StubHub's growing popularity likely has many fans wondering how they can invest in its stock when it finally goes public. Here's everything you need to know about how to invest in stocks like StubHub as the company prepares to go public.

Publicly traded?

Is StubHub publicly traded?

StubHub Holdings isn't publicly traded. It's a private company controlled by its founder and CEO, Eric Baker, who co-founded it in 2000. He subsequently sold it to eBay (EBAY 1.32%) in 2007 for $310 million.

Baker also founded Viagogo in 2006. The venture-backed company acquired StubHub from eBay in 2020 for about $4.1 billion. The combined company is now StubHub Holdings.

When will it IPO?

When will StubHub IPO?

StubHub didn't have an IPO on the calendar as of early 2024. However, the company has recently looked at going public. In 2022, StubHub Holdings explored a direct market listing that would have valued the ticket reseller at more than $13 billion. However, it never went through with the listing due to changing market conditions.

The company appears to be a candidate for an IPO in 2024 or 2025. According to a report by The Information, StubHub hired a new chief financial officer in 2023 to try to take the company public. A report by Morningstar also suggested that strategists from Renaissance Capital were anticipating an upcoming IPO from the company.

How to buy

How to buy StubHub stock

Since StubHub hasn't gone public yet, you can't buy shares of the ticket reseller. However, you could consider investing in an alternative. Here are three entertainment stocks to consider while you wait for StubHub to complete its IPO:

Live Nation Entertainment

Live Nation Entertainment (LYV 0.69%) is the world's leading live entertainment company. It owns Ticketmaster (which competes against StubHub in the ticket resale market), Live Nation Concerts, and Live Nation Media & Sponsorship.

The company gets 82% of its revenue from concerts, 13% from ticketing, and 5% from sponsorship and advertising. The company sells more than 550 million tickets each year.

Walt Disney

Walt Disney (DIS -0.63%) is a leading media and entertainment company. Disney owns several media and entertainment brands. It operates three business segments: Disney Entertainment (e.g., Pixar, Marvel, Lucasfilm, and Hulu), ESPN, and Disney Experiences (e.g., theme parks, cruise ships, and consumer products). The company's ESPN business brings live sports to viewers worldwide.

Madison Square Garden Sports

Madison Square Garden Sports (MSGS 0.57%) is a leading professional sports company. It owns the New York Knicks (NBA), New York Rangers (NHL), and two development league teams (Westchester Knicks of the NBAGL and Hartford Wolf Pack of the AHL). The company also operates a professional sports performance center (MSG Training Center).

Investors who want to buy one of these StubHub alternatives can purchase shares in any brokerage account. Here's a step-by-step guide on how to invest in these entertainment stocks.

Step 1: Open a brokerage account

You'll have to open and fund a brokerage account before buying shares of any company. If you still need to open one, here are some of the best-rated brokers and trading platforms. Take your time researching the brokers to find the best one for you.

Step 2: Figure out your budget

Before making your first trade, you'll need to determine a budget for how much money you want to invest. You'll then want to decide how to allocate that money. The Motley Fool's investing philosophy recommends building a diversified portfolio of 25 or more stocks you plan to hold for at least five years.

You don't have to get there on the first day. For example, if you have $1,000 available to start investing, you might want to begin by allocating that money equally across at least 10 stocks and then grow from there.

Step 3: Do your research

It's essential to thoroughly research a company before buying its shares. You should learn about how it makes money, its competitors, its balance sheet, and other factors to make sure you have a solid grasp on whether the company can grow value for its shareholders over the long term.

Step 4: Place an order

Once you've opened and funded a brokerage account, set your investing budget, and researched the stock, it's time to buy shares. The process is relatively straightforward. Go to your brokerage account's order page and fill out all the relevant information, including:

• The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
• The stock ticker (DIS for Disney, LYV for Live Nation Entertainment, or MSGS for Madison Square Garden Sports).
• Whether you want to place a limit order or a market order. The Motley Fool recommends using a market order since it guarantees you'll be able to buy shares immediately at market price.

Once you complete the order page, click to submit your trade and become a shareholder in one of these entertainment stocks while you await StubHub's IPO. Investors would follow a similar process to buy an IPO stock like StubHub when it goes public. Once shares become available, fill out the order page at your brokerage account with StubHub's selected stock ticker and submit your trade.

Profitability

Is StubHub profitable?

Digging into a company's profitability is a vital aspect of investment research. That's because profit growth tends to drive a stock's value over the long term. Ideally, you'd want to see the company growing its profits or at least on a path toward profitability.

Because StubHub isn't publicly traded, there isn't much publicly available information regarding its profitability. According to an article by The Information in late 2023, the company "hadn't turned a profit in five of the seven quarters after the start of 2021." The article noted that the lack of profitability came despite a strong rebound in live entertainment after the pandemic.

However, the company appears to be generating positive cash flow. According to a ratings report by credit rating agency S&P Global (SPGI -0.17%) in early 2024, StubHub was on track to grow its revenue at a double-digit rate in 2024.

That drove the rating agency's view that the company's adjusted leverage ratio would improve from about 9 times in 2023 to the high-7 times area in 2024. This outlook reflected the strong cash flow and free cash flow the company expected to produce in 2024.

Improving profitability will be important for the company. It needs to grow its profits to reduce its very high leverage ratio. An IPO might be helpful because the company could use the proceeds to help repay debt and get its leverage to a more manageable level.

Should I invest?

Should I invest in StubHub?

Since the company hasn't completed an IPO, you have plenty of time to decide whether to invest in StubHub. Here's a look at some of the reasons you might want to invest in the ticket reseller:

• You're a heavy user of StubHub and want to invest in the company.
• You believe that demand for live entertainment will continue growing as people spend more of their disposable income on experiences.
• You think StubHub can grow its revenue and profits rapidly in the future.
• You're not concerned about StubHub's high leverage ratio.
• You like investing in founder-led companies.
• You understand the risks of investing in IPO stocks, including that they can be very volatile.

On the other hand, here are some reasons you might decide not to invest in StubHub when it goes public:

• You don't use the company's services or prefer a rival ticket reseller.
• You're concerned about StubHub's high leverage ratio.
• You think the company's valuation is too high.
• You're concerned about growing competition from other ticket reselling platforms.
• You're concerned that a recession could significantly affect demand for live entertainment. A downturn in the economy could hurt StubHub's profitability, which in turn could affect its ability to service its debt.

ETF options

ETFs with exposure to StubHub

Many people would prefer to be passive investors instead of actively managing a portfolio of stocks. Exchange-traded funds (ETFs) make it easy to invest passively in the broader market or specific themes.

You can't currently invest passively in StubHub through ETFs because it's not a publicly traded company. However, you can use ETFs to invest in the broader entertainment industry. Here are a couple of options to consider:

• Invesco Leisure and Entertainment ETF (PEJ 0.35%): This fund invests in companies focused on the leisure and entertainment industries, including Live Nation Entertainment (the third-largest holding, at 5.4% of the fund's assets). It held 32 stocks in early 2024. The fund had a 0.58% total ETF expense ratio.
• Consumer Discretionary Select Sector SPDR Fund (XLY 2.31%): The ETF provides investors with exposure to the consumer discretionary sector (i.e., products and services consumers spend their disposable income on, like entertainment and leisure activities). The fund had over 52 holdings in early 2024, including 23.5% in the hotels, restaurants, and leisure sectors. The ETF had a very low 0.09% expense ratio.

Related investing topics

The bottom line on StubHub

StubHub is the world's leading marketplace for buying and selling tickets to live entertainment events and experiences. It's capitalizing on growing demand for in-person entertainment. That catalyst could make it a hot IPO when it finally goes public, which could come in the next year.

However, investing in StubHub won't be for everyone. The company took on a lot of debt to buy its namesake and get through the pandemic. That's one of the many risks investors interested in the company must consider before buying shares.

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