A Delayed IPO might be the least of MOTA’s worries

By : Elliot Bishop

Operating in a market with great growth prospects is one of the few things that every businessperson hopes for. That is certainly what MOTA was banking on when it filed for its IPO. MOTA stated that it expected to generate more revenue after this year than previous years because the market it operated in is growing and growing fast.

MOTA Group Inc. is a tech company that juggles several key products. On the one hand, the company sells high-tech drones under the MOTA label. Most of the firm’s drones are made for consumer use while some are meant to be used commercially. MOTA consumer drones sell under the label JETJAT whereas the commercial ones sell under PRO LIVE and GIGA labels. According to several market reports, the market for consumer drones is growing. Between 2015 and 2016, that market increased in size by 224%. A Goldman Sachs report stated that by 2020, drone companies would be looking at a market size of about $38 billion.

Now this all right and good. MOTA Group most likely will, in a few years, be able to take advantage of that market. But there are a few big ifs to take into consideration before that can happen. You see, MOTA is not the only firm looking to tap into that market. A few other companies, like 3D Robotics and PARRO, have taken that route before. Both of these firms went public with 3D Robotics raising up to $136 million in the debut offering. That would have been a positive sign for MOTA if only 3DR did not flank so soon after its offering. According to Forbes, the robotics company performed in the red zone because of intense competition from drone magnate DJI Innovations.

DJI Innovations has been dominating the industry for the past five years, and it looks like it isn’t going to stop anytime soon. Can MOTA survive in a space where 3DR failed? Remember that 3DR had had good financials when it was going public. It was also better connected than MOTA when it began trading. And despite that, the company was still overshadowed by DJI. Even MOTA conceded that its prospects don’t look that good when you factor the competition into the equation.

If you are an investor, MOTA’s considerable losses over the past two years might also make you avoid the IPO. Between 2015 and 2016, MOTA’s losses jumped from $299,000 to $2.43 million. Company CEO Michael Faro explained that the losses came about because the company was changing product lines. To hear Faro say it, MOTA is moving from low-margin low-cost electronic products onto the more high-end high-profit drone business. But making drones is an expensive move. On the other hand, it is profitable. But considering the competition in the drone market business, that’s not necessarily a good thing for MOTA.

So many other things stand in the way of MOTA’s success even post-IPO. The company might make the drones, but if it does not get approval for them, then its shareholders could be looking at massive losses. MOTA also has no alternate materials to make its drones with aside from the usual non-renewable ones.