The business of micromobility could be the next in line to suffer from the latest changes in the macroeconomic backdrop as Bird Global, one of the most prominent players in the space, has warned that could run out of business if it fails to secure further financing.
In its recently published quarterly earnings report covering the third quarter of the 2022 fiscal year, the company issued a going concern warning as it stated that its ability to stay afloat in the near term will largely depend on obtaining financing “on reasonable terms”.
This, according to Bird, is an achievement that is “subject to factors beyond its control”. The company cited the latest instability in the capital markets as a situation that has increased the cost of obtaining financing via equity and debt.
“There can be no assurances that such financing will be available to the Company on satisfactory terms, or at all”, the statement reads.
Bird Global’s Cash Reserves Dry Up Despite Cost-Savings Efforts
By the end of this third quarter, Bird Global counted on $38.5 million in liquid reserves. The company stated that these funds are not sufficient for it to meet its financial obligations within the next 12 months.
During the nine months ended on 30 September, Bird reported negative operating cash flows of $45 million along with capital expenditures of nearly $87 million resulting in a 9-month cash burn of $132 million – an average of $44 million per quarter.
To shore up its finances, Bird has opted to exit three European markets (Germany, Sweden, and Norway) and also paid down $45 million of an outstanding credit facility that should help the firm save some money down the road.
The firm is also restating previous financial statements – both quarterly and annual – for both the 2020 and 2021 fiscal years after it identified an error in the way it booked revenues. Bird reportedly recognized trips that were not going to be paid by customers as income according to the firm’s disclosures.
Moreover, the founder of the firm, Travis VanderZanden left his post as Chief Executive Officer for Bird in late June this year and was replaced by Shane Torchiana. In addition, the Board of Directors appointed a new Chief Financial Officer and Chief Technology Officer as part of an ongoing leadership restructuring.
What is Bird Global?
Bird Global is one of the many beleaguered startups that have succumbed to the latest changes in macroeconomic conditions. The company went public in November last year via a reverse merger with the Switchback II Corporation – a special purpose acquisition company (SPAC).
The company offers electric-powered scooters for riders in more than 400 cities across four different continents. During the first nine months of the 2022 fiscal year, the company booked 38.3 million rides and posted gross transaction value of $218.5 million. Bird generated revenues of $175 million during this period.
However, the company’s gross margins are quite thin and the firm has struggled to scale to the point that its top-line profitability can exceed its operating expenditures. Thus far in 2022, the company has lost $322.33 million compared to $168.2 million it lost during the same period a year ago.
Since 1 November, the price of Bird Global’s stock has dived from $10 per share to 36 cents on the dollar as Bird has been unable to turn a profit while its liquid reserves have been shrinking at a fast pace.
In a cash-flooded environment, Bird Global managed to secure enough financing to stay afloat despite losing millions. However, with investors now growing increasingly cautious and risk-averse, companies like Bird are struggling to attract investors who are willing to risk their cash in exchange for a poor-performing business.
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