We recently learned about that space technology company Matterport (NASDAQ: MTTR)which provides the space mapping technology used for 3D home tours and many other applications, has agreed to be acquired by real estate giant Co-star (NASDAQ: CSGP).
The terms of the deal were quite favorable for Matterport investors. CoStar values the company at $5.50 per share, half of which will be paid in cash and the other half in CoStar stock. This represents a massive 207% premium over Matterport’s most recent closing price.
Here’s an important point investors need to know: Matterport isn’t the only former SPAC that is cash-rich and has an excellent product, but for some reason there is uncertainty about its ability to become profitable as a standalone company. Two others that I think could follow the same path in the not-too-distant future are the neighborhood social media platform Next-door (NYSE: SORT) and genetics company 23andI (NASDAQ: IK).
Nextdoor has a huge user base, but profitability remains a concern
In many ways, neighborhood-focused social media platform Nextdoor is an impressive company. It ended 2023 with nearly 42 million weekly active users (WAUs) and has 88 million verified “neighbors” on its platform, both of which have grown significantly since the SPAC IPO.
However, the company has lost money since going public, and the losses are mounting. For 2023, Nextdoor posted a net loss of $147.8 million, up from $137.9 million in 2022. And 4% year-over-year revenue growth isn’t exciting enough to get investors to overlook it.
In addition to the fourth quarter earnings report, Nextdoor announced a few interesting things:
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CEO Sarah Friar will step down from her role and Nextdoor co-founder Nirav Tolia will take over in the second quarter.
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The company is adding $150 million to its stock repurchase program, and it’s not hard to see why: Not only is Nextdoor 80% lower than its $10 IPO price, but the market isn’t putting much value on the company. The company has a market capitalization of $791 million and has $531 million in cash and investments on its balance sheet.
Not only is the company cheaply valued, but even though losses are high, the numbers are starting to move in the right direction. Management expects revenue growth to accelerate in 2024 and adjusted profit margin before interest, taxes, depreciation and amortization (EBITDA) to improve by approximately 10 percentage points. While we have no idea if it will be acquired, its low valuation, large user base, and recognizable brand could make it a valuable target for the right buyer.
23andMe has a passionate founder who wants her company back
You’re probably familiar with 23andMe for its home genetics testing products, but it also has potential when it comes to pharmaceutical research, thanks to its vast library of genetic information on millions of people.
Unfortunately, 23andMe’s path to profitability hasn’t gone exactly as many had hoped when it went public in mid-2021 via a SPAC sponsored by Richard Branson’s Virgin Group. The stock initially went public at $10 per share and peaked at over $16, but has since fallen to $0.47.
It’s not hard to see why the stock has entered penny stock territory and is in danger of being delisted from the Nasdaq. The company is not only losing money over and over again, but also revenues decreasing, mainly due to the end of a drug development partnership with GlaxoSmithKline. In its most recent quarterly report, 23andMe not only forecast an adjusted EBITDA loss of $180 million to $185 million for the current fiscal year, but quarterly revenue fell 33% year over year.
23andMe founder and CEO Anne Wojcicki is reportedly considering taking the company private. She already owns more than 20% of the company and can make an offer for the rest of the shares.
While there’s no way to know what it will ultimately have to pay, it’s worth noting that 23andMe has a market cap of just $225 million and has $242 million in net cash and securities on its balance sheet. So if Wojcicki were to take her company back, she would likely have to pay a significant premium for the company, giving the market a chance. negative value.
How much will the shareholders get?
To be clear, we have no idea whether a deal will actually be reached on the takeover or private takeover of these two companies. And even if it does, it’s impossible to know what the final acquisition price might be.
Should you invest €1,000 in Nextdoor now?
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Matt Frankel holds positions at Nextdoor. The Motley Fool holds positions in and recommends CoStar Group, Matterport, and Nextdoor. The Motley Fool recommends GSK. The Motley Fool has a disclosure policy.
This tech company is being acquired at a shocking 207% premium — and these two stocks could be next originally published by The Motley Fool
