Money Losing, Short Term Rental Platform Sonder Gets Saved by Gores SPAC
Posted on 04/30/2021
San Francisco-based Sonder Holdings Inc. (Sonder) officially launched in 2014 and was co-founded by Francis Davidson, Chief Executive Officer, and Martin Picard, Global Head of Real Estate. Sonder is a hospitality company focused at short-term rentals. Sonder currently operates more than 300 properties across 35 markets in eight countries. Sonder works directly with real estate developers and property owners to lease, manage and operate spaces, providing guests with exceptionally designed accommodations at affordable prices on a nightly, weekly or monthly basis. Sonder is dependent on landlords to manage and maintain properties and maybe unable to negotiate attractive rates with new properties. Sonder’s leases are also subject to early termination.
Gores Metropoulos II, Inc. (Nasdaq: GMIIU, GMII and GMIIW), a special purpose acquisition company sponsored by an affiliate of The Gores Group, LLC, a global investment firm founded in 1987 by Alec Gores, and by an affiliate of Dean Metropoulos of Metropoulos & Co., announced that they have entered into a definitive agreement to combine with Sonder. The hospitality business is expected to have a pro forma enterprise value of $2.2 billion and over $700 million of net cash at closing. Existing Sonder stockholders will retain 74% ownership in the pro forma company.
Concurrently with the consummation of the transaction, additional investors have committed to participate in the proposed business combination by purchasing shares of common stock of GM II in a private placement (the “PIPE”). The US$ 200 million PIPE investment is led by an affiliate of The Gores Group, with participation from top-tier institutional investors, including Fidelity Management & Research Company LLC, funds and accounts managed by BlackRock, Atreides Management, LP, entities affiliated with Moore Capital Management, Principal Global Investors, LLC, and Senator Investment Group. The balance of the $450 million in cash is held in GM II’s trust account, in addition to $165 million raised as part of a March 2021 convertible notes offering led by Moore Strategic Ventures, the privately held investment company for Louis M. Bacon, Founder and CEO of Moore Capital Management, LP, together with the approximately $200 million in PIPE proceeds, excluding transaction expenses, will be used to fund operations and support new and existing growth initiatives. All references to available cash are subject to any redemptions by the public stockholders of GM II and payment of transaction expenses.
Sources of Funds
SPAC Cash in Trust, US$ 450 million
New PIPE Investment, US$ 200 million
Seller Rollover Equity, US$ 2,177 million
Advisors
Goldman Sachs & Co. LLC is serving as exclusive financial advisor to Sonder. Wilson Sonsini Goodrich & Rosati is serving as legal advisor to Sonder.
Morgan Stanley & Co. LLC is serving as lead financial advisor and Deutsche Bank Securities Inc. and Citigroup are serving as capital markets advisors to GM II. Moelis & Company LLC acted as additional financial advisor to GM II. Weil, Gotshal & Manges LLP is serving as legal advisor to GM II.
Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, Citigroup and Deutsche Bank Securities Inc. are serving as joint lead placement agents on the PIPE. Latham & Watkins LLP is serving as legal advisor to the co-placement agents.
Pre-SPAC Info
Past investors in Sonder include Atreides Management, LP, Bezos Expeditions, GreenOaks, Fidelity Management & Research, GreyLock Partners, iNovia, Spark Capital, Tao, Valor Equity Partners, Westcap, and the Wilson family.
According to Sonders’ presentation, the company had 2,000 live units in 2018, 5,000 live units in 2019, and 4,565 live units in 2020.
GAAP Revenue
2020, US$ 116.153 million
2019, US$ 142.908 million
2018, US$ 68 million
Net Income
2020, US$ 240.663 million (LOSS)
2019, US$ 178.767 million (LOSS)
According to Sonders’ calculations, the company would need to have 34,889 live units with to have a positive adjusted EBITDA of US$ 24,201,000. In 2020, Sonder says they have 4,565 units.
