By December 9, 2022, when Softbank-backed car-sharing company Getaround, Inc. (GETR) went public by merging with InterPrivate II Acquisition Corp., a Special Purpose Acquisition Company (SPAC), it was already late to the party.
Due to the fading appetite, relative to its peak in 2020 and 2021, for SPACs amid increasing interest rates and persistent downward market volatility, GETR’s shares tanked as much as 65% on its debut.
Six months on, GETR completed its acquisition of the assets of HyreCar Inc. (HYREQ), a premier gig car-sharing marketplace. With the acquisition expected to contribute up to $75 million of run-rate annualized Gross Booking Value, is the stock worth buying? Let’s find out.
Launched in 2011, GETR is the world’s first connected car-sharing marketplace which aims to simplify sharing of cars and trucks through its proprietary cloud and in-car Connect® technology and enable the shift away from car ownership. Today, the company has a presence across 1000 U.S. and European cities.
Which of the value-adjusted assets listed below would you prefer to let out for passive income if you have the scope?
- Residential real-estate
- Commercial real-estate
- Multiple cars
According to its preliminary unaudited financial results for the fiscal year ending December 31, 2022, GETR’s total revenues are expected to come between $59 million and $60 million. The company expects its service revenue for the year to be between $57 million and $58 million and its cash and cash equivalent to be around $64.3 million.
Since the company is yet to file its annual report on Form 10-K, on April 26, GETR received a notice from the New York Stock Exchange (NYSE) regarding its non-compliance to the continued listing standard that requires the filing of all required periodic reports with the Securities and Exchange Commission (SEC).
GETR has attributed this delay to the requirement of additional time for certain open audit and technical accounting matters, including items related to the preliminary purchase price allocation of the InterPrivate II Merger and consolidation of GETR’s results into InterPrivate II’s financial statements.
If the company is unable to file its annual report within six months of the due date, the delisting process will commence if NYSE doesn’t deem it appropriate to grant GETR a further extension of six months.
The April 26 notice was preceded by another notice on February 1 regarding non-compliance to continued listing standards since its common stock was trading below $1.00 over a consecutive 30 trading-day period. GETR has six months to cure its stock price deficiency and regain compliance.
Although GETR’s revenue is expected to increase to $79.99 million for the fiscal year ending December 31, 2023, the company is expected to keep incurring losses at least until the end of the fiscal year 2024.
In such a situation, while HYREQ’s assets would undoubtedly expand GETR’s global footprint with access to access to thousands of cars and tens of thousands of gig drivers, there is reasonable room for doubt on whether a company with a gross booking value less than half of GETR can contribute enough positive adjusted EBITDA to move the needle.
However, what could certainly move the needle is the $9.45 million aggregate purchase price of HYREQ, which along with the expected $45 to $50 million adjusted EBITDA loss for the fiscal year 2023, could burn a significant hole in its estimated cash reserves of a little over $64 million.
GETR plans to finance HYREQ’s acquisition with cash in hand while exploring additional financing options. However, it is unclear what those options are because debt and equity financing seem untenable given prevailing high borrowing costs and a sub-$1.00 non-compliant share price that’s yet to recover and would sink further if additional shares are issued.
Given this predicament, its unsurprising that on February 2, the company announced its restructuring plan to streamline operations and reduce costs in response to near-term macroeconomic uncertainty. The changes had impacted approximately 10% of the company’s staff and could result in estimated cost savings of $25 million - $30 million on an annualized run-rate basis.
Bottom Line
Bottom Line
With Americans, even the affluent ones, delaying major purchases such as automobiles amid high inflation and interest rates, macroeconomic headwinds could become tailwinds to fuel phenomenal growth in demand for car-sharing services.
However, just as we have learned during the dot-com, cryptocurrency, real estate, and numerous other bubbles through the ages, even if the next big thing comes along and changes the world (and the Internet really did), its fundamentals that determine whether a business can survive to capitalize on those windfalls.
Hence, in view of the uncertain prospects of GETR, it could be wise for investors to wait at least until the business assimilates the assets of HYREQ and becomes profitable before betting on it.
