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<ul class="summary-list"><li>French authorities charged Telegram CEO Pavel Durov with multiple crimes this week.</li><li>Telegram's finances reveal a $108 million loss on $342 million of revenue last year, the FT reports.</li></ul>This week <a target="_blank" href="https://www.businessinsider.com/telegram-ceo-pavel-durov-charges-questions-free-speech-censorship-2024-8">French authorities charged Telegram CEO Pavel Durov </a>with multiple crimes. But in the months before that, he was telling people he might take his company public, and floated a <a target="_blank" href="https://www.ft.com/content/8d6ceb0d-4cdb-4165-bdfa-4b95b3e07b2a">$30 billion valuation</a> for his messaging/social media company, which boasts more than 900 million users.Now the <a target="_blank" href="https://www.ft.com/content/242552a9-4280-46c0-9d61-bcf6ccd14400">Financial Times</a> says it has gotten a look at Telegram's 2023 finances, and those numbers make it very hard to imagine the company could convince people it's worth anything like $30 billion — even if its founder and CEO wasn't looking at jail time.The big headline numbers: Last year Telegram lost $108 million on revenue of $342 million, according to the FT. It's not uncommon for fast-growing consumer tech companies to be money losers when they go public. Twitter did that in 2012, and <a target="_blank" href="https://www.businessinsider.com/why-reddit-loses-money-ipo-research-development-revenue-2024-2024-2">Reddit did it this year</a>.The bigger red flag for Telegram is the reported makeup of its business: While it makes a modest amount of money from conventional social media vectors — advertising and premium subscriptions — it makes 40% of its total from crypto services, the FT reports. It operates a digital "wallet" where users can store crypto coins and the like, and it sells digital collectibles, like usernames, to its users. And that business seems to run primarily on Toncoin, a cryptocurrency originally built by Telegram.The whole setup, as the FT notes, makes it seem like Telegram is "a crypto firm with a sideline in messaging." Telegram didn't respond to a request for comment.You can build a real business as a crypto trading hub, and that can be quite valuable: see <a target="_blank" href="https://finance.yahoo.com/quote/COIN/">Coinbase</a>, currently worth some $45 billion.But asking investors to decide if Telegram is a social media company like Twitter, a messaging app like Whatsapp, or… something else, fueled by a semi-obscure digital coin, would be a real ask.And that's before you get to the issue of Durov's proposed valuation, and Telegram's very modest existing business, which don't sync up at all. Coinbase, for instance, eked out a small profit last year on revenues of $2.9 billion. Twitter, prior to Elon Musk's 2022 purchase, had been worth around $25 billion, and was doing around $5 billion a year. Reddit, currently worth $10 billion, did $800 million last year. It's really hard to see how Telegram's $342 million stacks up to those.Presumably any bankers working Telegram's theoretical IPO would play up the idea that while Telegram's top line is fairly modest, it is doing all of that with a teeny tiny staff of about 50 people. And that would give the company the ability to produce truly magnificent margins, one day, as the business matures.But that will be a much harder sell after this month.<a target="_blank" href="https://www.businessinsider.com/pavel-durov-arrest-france-what-is-telegram-explained-2024-8">While we still don't fully understand the French case against Telegram</a>, it seems to center around the company's deliberate policy of doing almost zero moderation, and an alleged unwillingness to comply with government requests to fight illegal behavior on the platform.Durov has said Telegram's no-moderation, no-compliance stance is a political/theological one. But it also has a real business component: As every big social network has learned, keeping an eye on what happens on your platform, and dealing with regulators who want a say about that, is a very expensive proposition that involves paying lots of humans. Right now, Durov doesn't have to worry about that.But if Durov wants to placate the French government — and maybe others who are looking at similar charges — he may very well have to agree to change the way he runs his business and hire a lot more people.Who knows? Maybe that would make it more valuable in the long run. But it would definitely ding the company's P&amp;L in the near-term.

Telegram's reported finances reveal a pretty small business with an uncertain future

Think Initial Public Offers (IPOs) are a sure-shot, quickfire method to make a quick buck? If so, then investing in some of India's biggest IPOs to date would have created multiple millionaires. However, if the data is to be believed, 18 out of India's top 30 IPOs by way of size have failed to deliver on the returns front. Recent data from Capitalmind PMS suggests that of all the mega IPOs India has seen in the past 2 decades, only 12 IPOs i.e. stocks of 12 companies have delivered more returns that what you would have received, had you bought and held your investments in Nifty500(which invests in biggest 500 companies by market size). Infact, Paytm (54%), <keyword id="20024191" type="General" weightage="20" keywordseo="Reliance-Power" source="keywords" meta.keywordsubtype="org" meta.entityname="Reliance Power" meta.hostid="261" meta.entityid="Reliance Power">Reliance Power</keyword> (81%), General Insurance Corporation (2%) actually generated negative total returns to date. The only outliers in the list of top 10 IPOs were Zomato (listed in July 2021) and Coal India (listed in April, 2010), which managed to generate excess returns i.e. more than what was generated by Nifty500. While Zomato's total return to date, which is considered a comprehensive gauge of a stock's profitability, stands at 265%, Coal India total returns are a massive 443%. In these cases, had you simply bought and held the Nifty500 index for a similar duration, your returns would've been 73%, and 435% respectively. Also, 5 of the biggest IPOs India has ever seen (Bajaj Housing Finance, Bharti Hexacom, Brainbees, Ola Electric) have come in the last 2 years. In some cases, having stayed put in your index investments would have yielded you far better returns. Consider this, FSN E-Commerce, Nykaa's parent company, listed on the exchanges on November 2021. Its total returns till date have been 2%, while had you invested in Nifty500 index, your returns would've been 53%. Similarly, the total returns to date on Bandhan Bank's stock, which listed in March 2018, was a negative 43%. But, the index has delivered a whopping 163% returns during the same time. Hits and Misses <table class="redcator-table-advance"><tbody><tr><td>Company Name</td><td>Total Returns to Date (In %)</td><td>CNX (Nifty500) Returns (In %)</td></tr><tr><td>Reliance Power (Feb 2008)</td><td>-81</td><td>961</td></tr><tr><td>Zomato (July 2021)</td><td>265</td><td>73</td></tr><tr><td>Gland Pharma (November 2020)</td><td>14</td><td>124</td></tr><tr><td>NHPC (September 2009)</td><td class="se-table-selected-cell">389</td><td>961</td></tr><tr><td>Indian Railways Finance Corporation (January 2021)</td><td>582</td><td>109</td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table>Source: CapitalMind PMS <h2>Surge in IPOs? Not really </h2>It is impossible to overlook the sheer number of public offerings seen in the Indian markets over the past 2 years. Around 600 share sale offers have already hit the market since 2023. Out of these, 335 have come in this year, as of October 2024. While over Rs 50,000 crores have been raised by these share sales so far since 2023, only 22% of these funds raises have come from companies who are hitting the market for the first time i.e. bringing out their IPOs. The rest have come from already listed companies seeking to raise more funds. The biggest IPO that India has seen to date, that of <keyword id="19906087" type="General" weightage="20" keywordseo="Hyundai" source="keywords" meta.keywordsubtype="org" meta.entityname="Hyundai" meta.hostid="261" meta.entityid="Hyundai">Hyundai</keyword> Motor India, closes for subscription today. With an offer size of Rs 27,870.16 crore, it is 35% bigger than the previous biggest IPO in the country(LIC in May 2022). As of 12:30 pm today, Hyundai's offer had been 87% subscribed, with significant interest from QIBs and employees. At 0.43x, participation of retail investors remained largely subdued. Notably, an IPO is considered cancelled and withdrawn, if it fails to meet the 90% subscription threshold.

Do large IPOs guarantee large returns? Data suggests that 18 of India's biggest 30 IPOs did not generate solid returns

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Telegram's reported finances reveal a pretty small business with an uncertain future

Peter Kafka

Do large IPOs guarantee large returns? Data suggests that 18 of India's biggest 30 IPOs did not generate solid returns

Ira Alok Puranik

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