Helbiz’s agreement to buy Wheels has officially been reached, and with it several promises from the joint micromobility operator to its investors that the bond will double its annual revenue and help it achieve profitability.
Helbiz is not the only joint micromobility operator struggling to achieve profitability. This is the situation most companies in this volatile industry are in right now. Helbiz arguably has a more difficult road ahead. The company has faced delisting from the Nasdaq for trading below the $1.00 minimum per share. Bird, the only publicly traded micromobility company, faces a similar risk of delisting.
Helbiz appears to be using the Wheels acquisition as a savior.
However, Wall Street — at least based on Helbiz’s stock price — was unimpressed by the company’s promise to deliver “more than $25 million in revenue for the full year 2022,” leveraging Wheels’ user base of 5 million riders and expanding into new markets like Los Angeles.
Investors seem to take a negative view. Helbiz shares fell 8.10% on Tuesday to close at $0.28. The share price has fallen about 65% since initially making the acquisition announcement. But that drop pales in comparison to the freefall it has experienced since its opening debut in August 2021 of $10.20. To regain Nasdaq compliance, Helbiz must find a way to increase its share price by 257% for at least 10 consecutive trading days before January 16, 2023.
Why don’t investors take the bait? It may be due to the company’s dwindling cash reserves, based on the company’s second-quarter earnings report, its ambitious positive gross profit margin target, or its restructuring plans.
Helbiz CFO Giulio Profumo said the combined company expects to achieve positive gross profit margins in the next nine months and to achieve profitability at operating levels in the next 24 months. It appears that Helbiz is counting on restructuring to help him reach that target.
“We intend to restructure the combined company to accelerate our path to profitability with a combination of higher margins from the Wheels business, operational savings from redundancies in both companies, and reduced cost of revenue,” said Profumo.
We’ve seen such language before — Bird made similar comments before laying off 23% of its staff and leaving dozens of markets worldwide, as Tier did before laying off 10% of Spin’s workforce.
Around the time Helbiz signed off on its intention to acquire Wheels, Wheels laid off several employees. Since then, the company has laid off many of those employees, according to a source familiar with the matter, but a Helbiz spokesperson told TechCrunch that some of the furloughed Wheels employees have been brought back. He also said that nothing has been planned in terms of layoffs.
“There is a gap that is filled by each company and we will use it for efficiency and cost savings,” said Matt Rosenberg, Helbiz’s head of communications for North America.