Inside Helbiz's 🔥 hell 🔥 biz

"These conditions raise substantial doubt about the Company's ability to continue as a going concern."

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Here is something you never want to see in a company’s annual report:

Our financial statements for the fiscal year ended December 31, 2021 include an explanatory paragraph from our auditor indicating that there is substantial doubt about our ability to continue as a going concern.

That is from the risk factors section of the 2021 annual report that micromobility firm Helbiz filed with the SEC on April 15. The note from auditor Marcum LLP, dated one day earlier, explains:

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

“Note 1” continues:

Going Concern

The Company has experienced recurring operating losses and negative cash flows from operating activities since its inception. To date, these operating losses have been funded primarily from outside sources of invested capital. The Company had, and may potentially continue to have, an ongoing need to raise additional cash from outside sources to fund its expansion plan and related operations. Successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company plans to continue to fund its operations and expansion plan through debt and equity financing. Debt or equity financing may not be available on a timely basis on terms acceptable to the Company, or at all.

Helbiz was founded in 2016 by Italian entrepreneur Salvatore Palella to offer e-scooter, e-bike, and moped rentals in cities. It raised relatively little funding until 2019, when it announced plans to dual list on the Nasdaq and Italian market AIM Italia and closed an initial $10 million investment round. At this point Helbiz claimed to be the market leader in Italy, which made up the bulk of its business, as well as to have pilot programs in cities in Spain, Portugal, Greece, France, and Singapore. In 2020, it began operating e-scooters in several U.S. cities, mostly in the D.C. metro area, including leasing competitor Skip’s operating license for up to 2,500 e-scooters in D.C. proper (Skip went bankrupt in mid-2021).

Helbiz listed on the Nasdaq in August 2021 through a special purpose acquisition company (SPAC), becoming, in its words, the first U.S. publicly listed micromobility firm. The deal with GreenVision Acquisition Corp. landed it a bit more funding, bringing its total to around $67 million, according to PitchBook. That summer Helbiz also launched Helbiz Kitchen, a food delivery service operating out of a dark kitchen in Milan, and began streaming sports-focused media content to subscribers in Italy.

The rosy financial projections Helbiz shared with investors ahead of the SPAC in February 2021 included $13 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) on $80 million revenue in 2021 and $190 million in EBITDA on $449 million in revenue by 2025. Helbiz forecast ads and ‘new verticals’ would grow to about 25% of its revenues, with the majority continuing to come from mobility offerings. Helbiz provided breakdowns of its aspirational unit economics and declared it had a “Clear path to profitability.”

Haha, well, 2021 would beg to differ.

For 2021, Helbiz reported a net loss of $72 million on $12.8 million in revenue. Net loss and revenue ballooned in line from 2020, by about 190% each. Mobility accounted for $9.9 million or 77% of 2021 revenue, followed by media (22%) and Helbiz Kitchen or ‘other revenues’ (1.2%), which Helbiz described in its annual report as “immaterial.”

Within the mobility segment, most revenue (79%) came from individual ride hires, which Helbiz calls ‘pay per ride.’ Another 15% came from the company’s subscription offering, Helbiz Unlimited, which gives customers access to e-bikes and e-scooters for a monthly fee. And a very small amount (6.7%) came from partnership fees, which Helbiz describes as “mainly related to co-branding activities on the Helbiz fleet and marketing campaigns on the Mobility App.”

Clearly, things are not going as planned. What the plan is now is less clear. The mobility business is growing but not nearly as fast as Helbiz had hoped and the food delivery offering is, as it said itself, “immaterial” despite Helbiz hiring 50 people, leasing a kitchen in Milan for €120,000 ($144,000) per year, and procuring 20 e-mopeds for €98,000 ($120,000). The media venture is… confusing. Helbiz’s stock price is hovering around $1.50 per share and its market capitalization at around $52 million, a far cry from the $408 million valuation it touted when it went public. Earlier in April, Helbiz reportedly failed to pay its U.S. employees, which CEO Palella blamed on a payroll system error. Helbiz is also mixed up in a lawsuit brought by investors who claim they were defrauded into buying the HelbizCoin in a cryptocurrency ‘pump and dump’ scheme. Defending the suit, Helbiz noted in its annual report, “required a substantial amount of funds and our management’s time.”

As far as I can tell, the only one who made out well at Helbiz in 2021 was Palella, who received $2.96 million in total compensation. That included his salary ($917,000), bonus ($1.7 million, including $500,000 for the company becoming publicly traded and an “extra annual bonus of $285,000 for the Company’s annual performance”), and other compensation like health insurance and housing expenses ($298,000, and can I note that he gets housing costs covered at up to $25,000 per month!). Palella’s bonus structure also provides $35,000 for each city Helbiz launches mobility operations in, $50,000 for each city it launches food delivery in, and $250,000 for each region Helbiz starts a fintech business line in. I guess that gives you a sense of Helbiz’s priorities, but, I don’t know, it seems like it might create some skewed incentives. Also, it seems a little crazy that Palella’s total compensation in 2021 was roughly equivalent to a quarter of Helbiz’s revenue that year, but hey, maybe he’s really good and has a secret plan to turn it all around, he did get that extra bonus for their 2021 performance.

Jokes aside, it strikes me that Helbiz’s going concern warning also sounds like business as usual for a lot of startups in this space. The company “has experienced recurring operating losses and negative cash flows from operating activities since its inception” which it has funded to date “primarily from outside sources of invested capital.” The company may have “an ongoing need to raise additional cash from outside sources to fund its expansion plan and related operations” and becoming profitable “is dependent upon achieving a level of revenues adequate to support the Company’s cost structure.” That could apply to so many startups! “I thought nobody cared about huge losses for startups,” a friend said when I told him I was writing about Helbiz, and a lot of times that is right! With Helbiz it seems less that it lost too much money and more than it failed to raise enough money to lose. Helbiz never mustered the financial arsenal of its bigger competitors in ride-hail, delivery, and micromobility, and so it has less money and less time to figure things out now.