Why Rover’s $2.3B sale worth makes good sense

And why not each SPAC is a canine

Rover goes personal in a $2.3 billion, all-cash sale to Blackstone, the corporate introduced earlier this week. The pet care–centered firm raised hundreds of millions of dollars whereas personal, by way of a Sequence G, and later went public via a SPAC. Notably, in contrast to an incredible many SPAC mixtures, Rover is proving that blank-check firms usually are not merely a solution to incinerate wealth.

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The previous startup has a 30-day buying provision constructed into its cope with Blackstone, that means that different provides could come to the fore. Nonetheless, with the personal fairness group paying a stiff premium for Rover shares — 61% greater than the corporate’s 90-day quantity weighted common share worth, per a release — that doesn’t sound too possible.

The Rover deal is pricey however it has some notable caveats that inform us quite a bit concerning the state of the marketplace for tech, and tech-enabled, firms. I’ll guess you didn’t anticipate a pet-focused e-commerce market to earn an 8.7x income run charge a number of in 2023!

This morning I need to dig into why I believe Blackstone is paying a lot for Rover, what we are able to glean from that analysis for different startups, and why a choose few SPAC’d public firms which are buying and selling like literal canines could also be bargains for the suitable purchaser.

That price ticket isn’t unreasonable

Rover and Blackstone introduced their transaction after we obtained the previous company’s Q3 2023 results, that means that we’ve got fairly up-to-date figures regarding its current efficiency.

Rover reported third-quarter revenues of $66.2 million, up 30% from the identical interval one yr in the past. The corporate additionally flipped to GAAP web revenue and advised traders that it supposed to purchase again extra of its personal shares. It additionally beat guidance within the quarter.