wheels come off start-up with Bird-brained business plan
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Just a few years ago, electric scooters seemed poised to take over city streets. Early adopters saw them as a fun, fast and cheap. Critics said they were a nuisance and a hazard to pedestrians. Venture capitalists poured billions into so-called micromobility upstarts.
So much for that. Bird Global, the e-scooter rental pioneer, has filed for Chapter 11 bankruptcy protection.
The start-up was the fastest ever to reach a “unicorn” valuation above $1bn. The business was then hit hard by Covid-19 lockdowns, which crushed rider numbers.
But it was higher interest rates and the end of the cheap money era that delivered the fatal blast of birdshot.
Bird never figured out how to make money. The economics of scooter rentals have never made sense at any level. The cost of buying and maintaining a fleet is high. Yet rental prices need to stay low to keep riders.
At the same time, Bird had to contend with competition from European and American scooter start-ups. There was also a regulatory backlash. City officials got tired of dealing with piles of e-scooters discarded on sidewalks and roads.
Since 2018, Bird has racked up more than $1.6bn in net losses. It had just $10.2mn in unrestricted cash and cash equivalents at the end of September.
Investors were happy to support high-growth, high-loss start-ups when money was virtually free. That allowed Bird to go public in 2021 through a special-purpose acquisition company. At its peak the company had a market value of nearly $2.5bn.
In September, the company was delisted from the NYSE after it failed to maintain a market cap of above $15mn for 30 consecutive days.
Under the restructuring agreement announced on Wednesday, Bird will essentially be taken over by its creditors. Apollo and Bird’s second-lien lenders have agreed to provide $25mn in financing to keep the motor running while it restructures in court. Bird will sell its assets, which existing lenders have agreed to purchase.
Expect other former high-flyers to be plucked of their finery in the same way.
The Lex team is interested in hearing more from readers. Please tell us what you think of the e-scooter boom in the comments section below.
