The gig economy is a bust in the public markets
It's not just Bird, it's (almost) all of them
We talked last week about how early Bird investors are faring.
In short: not well. Bird has sunk so low in recent months that its stock ($0.37 per share as of yesterday’s close) is currently trading below the initial seed round ($0.41 per share). Private backers like Sequoia Capital, which led Bird’s C and C-1 rounds and also invested in the series D at $12.92 per share, are out tens of millions of dollars. Bird co-founder Travis VanderZanden, meanwhile, is attempting to sell his Miami mansion for more than three times what his entire stake in Bird is now worth.
After completing the tour of Bird SEC filings these articles required, I thought, you know what, what about the other sharing/gig economy companies that went public, how are they doing? What is the public markets referendum on one of the buzziest and most profligate startup segments of the past decade?
The gig economy is a bust
I gathered up a dozen gig/sharing companies that went public either in a traditional IPO or through a SPAC and looked at how their stock has performed since the public offering. It’s not a fully comprehensive analysis, but it certainly gives you an idea.
Airbnb is doing well (+72%). Fiverr, a digital services platform and posterchild for unhealthy gig work habits, is doing fine (+32%). Everyone else is doing somewhere between bad and dreadful.
One notable trend from this chart is that within the spectrum of bad to dreadful, IPOs have fared significantly better than SPACs. Five of the six gig firms on my list that went public in a traditional IPO are performing better than all six that went via SPAC. The exception is Lyft, which is down 83% since its March 2019 IPO, and trading closer to the series D issue price that valued it at $1 billion in 2014 than to its $72 per share IPO price. (Lyft’s current $4.6 billion market cap is roughly equivalent to the post-money valuation from a private secondary transaction it completed in December 2015, according to data from PitchBook.)
That was a lot of jargon, so let’s pause here briefly. At some point, many privately held companies decide to ‘go public,’ i.e. open up stock in their company to public market investors. Usually a privately held company like a startup does this through an initial public offering or IPO. This involves hiring some bankers who figure out how many people want to buy the startup’s stock, how much it should charge for it, and when it should debut, in exchange for a nice big fee; going on a roadshow pitching that stock to institutional investors and gauging demand; and ultimately issuing the new stock which will be offered to the public and traded on public exchanges.
Another option for going public is through a SPAC, or Special Purpose Acquisition Company, a name as boring as its acronym. The way a SPAC works, very basically, is that investors or ‘sponsors’ form a public company specifically so that it can merge with a private company (for instance, a Bird or a Helbiz), which then becomes public through that merger.
SPACs, also known as blank-check companies, became suddenly very popular from 2020-2021 as firms shied away from traditional IPOs amid the volatile, pandemic-striken economy. SPACs also helped take public a host of companies whose performance may not have been robust enough to weather an IPO process. Or, as the Wall Street Journal put it earlier this year:
Critics of SPACs say the loosely regulated going-public process allows startups to attract investors with bullish financial projections, despite having little or no revenue in their history.
Anyway, the point is that SPAC deals by and large have turned out to be a disaster, to which the gig economy is no exception. Investors in SPACs that completed their mergers since 2015 have lost on average 37% on their investments a year, according to data from a forthcoming academic paper recently covered by the WSJ. An open question then is to what extent the dire performance of companies like Bird and Helbiz is due to business fundamentals vs. being dragged down by some sort of SPAC penalty. On the other hand, with the exception of Airbnb and maybe Fiverr, pretty much none of these companies are doing well, which is perhaps not surprising when you consider many of those companies’ histories of losing money and being unsure whether they will ever make money, a winning investment thesis if I’ve ever heard one.