The Bull/Bear/Grade IPO Evaluation Framework
Force yourself to name exactly what has to be true before you love or hate a new stock.
- Difficulty
- Easy
- Time to result
- ~days to results
- Steps
- 6
- Confidence
- 70%
Acquired's repeatable method for evaluating a newly public company: build the strongest possible bull case and the strongest possible bear case using S-1 disclosures and market data, then force a falsifiable prediction by describing what an A+ outcome would require and what an F outcome would look like on a defined time horizon. Applied to Uber, the hosts traced the IPO pricing narrative from rumored $120B valuations down to an actual $82B print, isolated ride-sharing growth deceleration and negative contribution margin as bear evidence, isolated Uber Eats growth and shared-infrastructure economics as bull evidence, separated the ~$18B of foreign equity stakes from the core operating business, and defined success as reaching positive contribution margin before needing to raise additional capital.
Origin
Developed by Acquired hosts Ben Gilbert and David Rosenthal as their standard closing structure for IPO episodes, first used extensively on their Lyft IPO episode weeks earlier.
Core principles
- 01Separate narrative (what people say about the stock) from fundamentals (what the filings actually show).
- 02A company can be simultaneously a growth story in one segment and a decline story in another - isolate the two.
- 03Strip out non-operating assets (equity stakes, holding company positions) before valuing the core business.
- 04Define success and failure as concrete, checkable milestones, not vibes.
How to run it
- 1
Reconstruct the pricing narrative
Trace how the rumored valuation moved from initial banker leaks through roadshow guidance to the actual IPO price, to see whether sentiment was rising or falling into the print.
Pro tip A shrinking range into pricing is itself bearish information.
- 2
Build the bull case
Collect every data point that supports the optimistic story - new product growth rates, shared infrastructure advantages, market size.
- 3
Build the bear case
Collect every data point that undermines the story - decelerating core growth, shrinking or negative contribution margin, market share losses called out in the filing's own risk factors.
Pro tip Read the risk-factors section of the S-1 literally, word by word - companies bury real admissions there.
- 4
Separate holding-company value from operating value
Identify and back out equity stakes in other companies so you don't accidentally value the core operating business at an inflated multiple.
Watch out Minority equity stakes are illiquid and shouldn't be valued at full mark.
- 5
Ask what you have to believe
State explicitly the operating assumptions an investor must accept to justify the current price.
- 6
Define the A+ and F scenarios
Write down the concrete milestones and timeframe that would make this an A+ outcome, and the concrete failure conditions that would make it an F.
Pro tip Tie the F scenario to a resource constraint (e.g., running out of capital) rather than a vague 'if it goes badly.'
In the wild
The hosts built out Uber's bull case (Uber Eats growth, shared driver infrastructure, Amazon-style long-term margin story) against its bear case (flat ride-sharing growth, contribution margin turning negative, share losses to Lyft), then separated out ~$18B of Didi/Yandex/Grab equity stakes from the core business before assigning a grade.
→ They concluded a real A+ would require ride-sharing and Eats to reach positive contribution margin before Uber needed additional outside capital, while an F would mean running out of investor patience first, forcing dilutive fundraising.
The hosts note they used the identical bull/bear/grade approach a few weeks earlier for Lyft's much smaller IPO, comparing Lyft's capital base (roughly one-sixteenth of Uber's total raise) against its own bull and bear evidence.
→ Established a comparative baseline showing Lyft had been losing the capital war to Uber, which directly informed Uber's own bear case.
Common mistakes
Anchoring on day-one pop
Judging an IPO's success by first-day trading is misleading; both Lyft and Facebook traded far below their offer price for extended periods after their debuts before the underlying business thesis played out.
Valuing holding-company stakes at full price
Lumping illiquid minority equity stakes in with core operating revenue overstates what the operating business is actually worth.
Accepting comp narratives uncritically
Uber's roadshow compared itself to early Amazon's losses, but the scale of Uber's $3B annual operating loss was categorically different and shouldn't be waved away by analogy alone.
Is it for you?
Not ideal for
Pre-revenue or private companies where there isn't yet enough disclosed financial data to build a real bear case.
From the transcript
“All right, so that's bull and bear. Let's go and grade this thing.”
“But the question is, what do you have to believe to love this right now?”
From the episode
The Uber IPO