It’s been over a year since shared micromobility startup Bird warned shareholders that it might get delisted from the New York Stock Exchange. On Monday, that warning became a reality.
The news comes about a week after Bird closed a deal to acquire fellow e-scooter company Spin from German operator Tier, a move that Bird says will help it achieve long-term sustainable profitability, which Bird has been unable to accomplish on its own.
The timing of that purchase and its delisting is awkward, leaving Bird trading on the risky over-the-counter marketplace while it appeals the NYSE’s delisting decision.
Bird has suffered blow after blow since going public via a merger with a SPAC in November 2021. The fact that Bird was delisted — after it failed to maintain a market capitalization above $15 million for 30 consecutive days — tells us that investor confidence in the company is at low ebb.
While Bird did see a boost in its share price after announcing the Spin acquisition, the gains were short-lived and now they’re almost irrelevant.
Bird said the addition of Spin — including the company’s fleet of scooters and access to “key cities” — will bring in additional revenue for the newly combined company, and prove “immediately accretive to earnings.”
Whether Bird can bounce back and convince investors on the Pink Sheets to buy its shares will depend in part on Spin’s balance sheet. But since we don’t have those, and Bird would not supply them, we have to take a stab at predictions based on Bird’s past financial performance.
What could Spin do for Bird?
Spin currently operates in around 50 cities and university campuses around North America, which opens up Bird to new markets. Bird says there is minimal overlap between the two companies’ operations, and that the acquisition will give Bird access to cities like Baltimore, Salt Lake City, Washington D.C., and San Francisco. Notably, Bird was recently banned from Baltimore, D.C. and San Francisco.
Bird expects the transaction to have upward of $20 million in synergies that will bolster its earnings. The company didn’t elaborate on how those synergies will be realized and within what time frame. The deal will result in Bird’s total revenue footprint expanding. In the 12 months ending June 30, Spin delivered $45 million in net revenue, bringing Bird’s and Spin’s combined net revenue to $265 million for that period.
All things considered, that’s a relatively small contribution from Spin. Is it enough to keep Bird operating?
As of June 30, Bird had $6.8 million in unrestricted cash and cash equivalents. To fund its acquisition of Spin, Bird got an advance on an existing loan with MidCap Financial Trust for $6 million, per regulatory filings. The total acquisition price of Spin was $19 million; $10 million of that was cash upfront, meaning Bird has likely seen its cash and cash equivalents balance decline substantially.
As Spin will remain its own brand and run its own scooters in existing markets, Bird might not have to shell out much more for operational needs. That could, in turn, limit any additional cash burn at the conjoined company in the wake of the deal.
For the 12-month period ending June 30, Bird earned $220 million in revenue. Its loss from operations for that same period totaled $303.2 million, indicating that it remains far from profitability in GAAP terms. If we instead examine its adjusted EBITDA results from its most recent quarter (June 30), we still find red ink, with the company posting a –$1.2 million result. And the company consumed $1.8 million in cash during the quarter, according to its free cash flow results.
In the same earnings report, Bird told investors that its cash balance would not be enough to “sufficiently meet [its] obligations” in the next 12 months.
Per regulatory filings, Bird’s $6 million loan from MidCap is due July 12, 2025. The company also owes Tier another $6 million to be paid over time for the purchase of Spin, but it’s unclear what the time frame for that is or how much interest will accrue.
MidCap loan and outstanding payment to Tier aside, Bird’s liabilities — both current and total — exceeded its assets at the end of Q2 2023. As of June 30, Bird’s total assets were $25.2 million, a sliver of its current liabilities of more than $122 million. Bird also had a stockholder deficit, it reported at the same time. If it were to liquidate in order to pay off its debts, there would be a shortfall and nothing left for shareholders.
In short, Bird remains a distressed company, and we’re not sure if M&A will ameliorate or help solve its existing financial woes. Hopefully its Q3 2023 earnings cycle will provide more information.
Bird’s tumultuous history
Bird received its first delisting warning in June 2022 due to its low share price. The scooter company stopped trading Monday at a share price of 77 cents, sporting a market cap of just $9.9 million at the time.
Bird’s interim CEO Michael Washinushi said in a statement that Bird’s current market cap doesn’t reflect the intrinsic value of the company.
Back in the scooter craze days of 2019, Bird was valued at a whopping $2.5 billion following a funding round led by Sequoia Capital and CDPQ. But the COVID-19 pandemic in 2020 brought business to a standstill. There was some recovery in 2021, which led the company to go public via SPAC in November 2021 at an implied value of $2.3 billion. But the unit economics of the scooter-sharing business are difficult to get right, and to date, Bird has lost almost all of its value.
Bird’s failure to achieve favorable operating results are partially attributable to the high-cost, low-return nature of the scooter business, which seems to require scale and cost conservativeness at the same time. But the Florida-based company has made its own bed in certain ways. For example, Bird moved to an asset-light business model that relies on a fleet manager program to bring in revenue. Under that model, contractors lease fleets of Bird vehicles and deploy the vehicles on Bird’s behalf. This has led to less control over the placement of vehicles, which can affect revenue.
Bird has also dragged its feet when it comes to deploying scooters with removable batteries, which other companies like Lime say significantly reduces the cost of operations and increases asset utilization.
The company has burned through cash over the years, too, although it has managed to reduce expenditures between 2022 and 2023. When Shane Torchiana took over as CEO in September 2022 (he stepped down from the role in August), he implemented a strategy of severe cost cuts, which included leaving dozens of unprofitable markets across the U.S., as well as Sweden, Norway and Germany.
In the summer of 2022, Bird also laid off 23% of its staff and shut down its retail scooter product. The savings from all of these measures have definitely made an impact on Bird’s bottom line, but the company’s top line has continued to suffer. Revenue and number of rides are down year-over-year, which makes sense if Bird is in fewer markets. But average rides per vehicle per day is also down — 19% per Q2 earnings — which tells us Bird’s scooters aren’t being utilized as much.
Bird has work ahead of it to rebuild investor confidence. Without knowing more about how the combined entity of Bird and Spin will create a viable business model, it’s difficult to see the clear path to profitability. More when we get the data.
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