We recently learned that spatial 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 CoStar (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 half paid in CoStar stock. This represents a massive 207% premium over Matterport's most recent closing price.
Here's a key point that investors need to know: Matterport isn't the only cash-rich former SPAC that has an excellent product, but for one reason or another there is uncertainty about its ability to reach profitability as a stand-alone business. Two others that I believe could follow the same path in the not-too-distant future are neighborhood social media platform Nextdoor(NYSE: KIND) and genetics company 23andMe (NASDAQ: ME).
Nextdoor has a massive user base, but profitability remains a concern
In many ways, neighborhood-focused social media platform Nextdoor is an impressive business. 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 its SPAC IPO.
However, the business has been losing money since it went public, and the losses are getting wider. For 2023, Nextdoor posted a $147.8 million net loss, versus $137.9 million in 2022. And 4% year-over-year revenue growth isn't exciting enough to get investors to overlook it.
Along with its fourth-quarter earnings report, Nextdoor announced a few interesting things:
- CEO Sarah Friar will step down from her position, and Nextdoor's co-founder Nirav Tolia will take over in the second quarter.
- The company is adding $150 million to its share repurchase program, and it isn't hard to see why: Not only is Nextdoor 80% lower than its $10 IPO price, but the market isn't giving much value to the business. The company has a $791 million market cap and has $531 million in cash and investments on its balance sheet.
Not only is the business cheaply valued, but while the losses have been high, the metrics are starting to move in the right direction. Management expects revenue growth to accelerate in 2024 and for its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin to improve by about 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 acquirer.
23andMe has a passionate founder who wants her business back
You're probably familiar with 23andMe because of its in-home genetics testing products, but it also has potential when it comes to pharmaceutical research, thanks to its massive library of genetic information on millions of people.
Unfortunately, 23andMe's path to profitability hasn't exactly panned out as many had hoped for when it went public through a SPAC sponsored by Richard Branson's Virgin Group in mid-2021. The stock went public at $10 per share initially and peaked at more than $16, but has since fallen to $0.47.
It's not hard to see why the stock has fallen into penny-stock territory and is in danger of being delisted from the Nasdaq. Not only is the company losing money hand over fist, but its revenue is actually declining, mainly due to the end of a drug development partnership with GlaxoSmithKline. In its most recent quarterly report, not only did 23andMe project an adjusted EBITDA loss of $180 million to $185 million for the current fiscal year, but quarterly revenue dropped by 33% year over year.
23andMe's founder and CEO Anne Wojcicki is reportedly considering taking the company private. She already owns over 20% of the business and may make an offer for the rest of the shares.
While there's no way of knowing what she might end up paying, 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 business back, she'd likely have to pay a significant premium for the business, which the market is giving a negative value.
How much will shareholders get?
To be perfectly clear, we have no idea if a deal will actually be reached for these two businesses to be acquired or taken private. And even if they are, there's no way to know what the eventual acquisition price might be.
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Matt Frankel has positions in Nextdoor. The Motley Fool has positions in and recommends CoStar Group, Matterport, and Nextdoor. The Motley Fool recommends GSK. The Motley Fool has a disclosure policy.
