Luxury short-term rental startup Sonder has agreed to go public through a merger with blank-check company Gores Metropoulos II Inc., according to Reuters.
The news outlet said the deal would value the combined company at about $2.2 billion, a slight decrease from the more than $2.5 billion valuation expected a month ago. Sonder itself is already a unicorn with a $1.3 billion valuation as of its $170 million Series E round in June 2020.
Sonder, founded as “Flatbook” by Francis Davidson and Lucas Pellan in 2012, leases apartments or entire buildings from landlords, spruces them up and rents out units over flexible timelines, anywhere from one night to two years. It provides hotel-like amenities along with service from staff reachable by text 24 hours a day, according to its website.
San Francisco-based Sonder has raised more than $560 million to date and its investors include Fidelity Investments, WestCap Group, Inovia Capital, Valor Equity Partners, Atreides Management, Tao Capital Partners, Spark Capital, Flight Ventures, Alate Partners, Greenoaks Capital Partners, Greylock Partners and Bezos Expeditions.
The merger deal will give Sonder $650 million in cash proceeds, including a private placement of $200 million from investors such as Fidelity Management & Research Company and BlackRock, according to Reuters.
“The deal allows us to put meaningful capital on the balance sheet in what’s an exceptional time, if not the best time in the history of hospitality, to lean into the recovery,” Davidson said in an interview with Bloomberg.
Sonder operates more than 300 properties in 35 cities in eight countries and plans to use the proceeds from the merger to both grow in the markets it already has a presence in and expand to new markets in Latin America and Asia, Davidson said in an interview with Yahoo Finance.
Gores Metropoulos II, a special purpose acquisition company (SPAC) led by chairman Dean Metropoulos and CEO Alec Gores, raised $450 million in a January initial public offering.
Employing a SPAC — essentially a shell company that acquires another company with the sole purpose of taking it public and has no other business — has become trendy for tech companies in the current economic climate. IBuyer Opendoor recently went public through a merger with a SPAC, and in March, Offerpad announced its plans to go public through one of three SPACs founded by former Zillow CEO Spencer Rascoff. WeWork is also set to go public via a SPAC, after failing to go public through an IPO in 2019.
Sonder has experienced a sharp turnaround in the past year. Due to the pandemic, in March 2020 the hospitality company cut one-third of its staff, laying off or furloughing 400 people in a bid to offset a declining number of bookings, The Information reported. But Sonder nonetheless raised its Series E in June, which the company said was “validation of the progress we’ve made on the strategies we outlined at the outset of the pandemic to ensure Sonder would survive the crisis and emerge a stronger company.”
Sonder reported $116.2 million in revenue last year, a 19 percent drop year over year, and lost $240.6 million, according to The Real Deal. The company projects $4 billion in revenues in 2025, profitability in 2023, and growth from 5,000 units in 2020 to 77,000 units within five years, the news outlet said.
Sonder declined to comment for this story.