On Friday, HyreCar announced the pricing of an underwritten registered public offering of 3.5 million shares of its common stock at a public offering price of $3 per share.
The company looking to leverage on a marketplace for ridesharing revealed even more in its filing with the Securities and Exchange Commission, acknowledging the depths of its recent losses as well as non-binding relationships with both Lyft and Uber.
Nonetheless, HyreCar is looking to generate $10.5 million through this offering — or $12.075 million if the underwriter exercises its option in full — with the net proceeds for expanded sales and marketing as well as customer support and technology investments to continue to grow its platform.
Northland Securities is acting as the sole book-running manager for the offering. HyreCar also granted the underwriter a 30-day option to purchase up to an additional 525,000 shares of its common stock at the public offering price, less the underwriting discount, to cover over-allotments, if any.
The offering is expected to close on or about Tuesday, subject to customary closing conditions.
Update on string of losses & tangible book value
When that closing happens, the funds will arrive with HyreCar incurring operating losses each year and every quarterly period since inception back in 2014.
At the close of the first quarter in both 2019 and 2018, HyreCar acknowledged in its SEC filing that operating losses totaled $1,728,889, and $1,574,057, respectively.
“We expect our operating expenses to increase in the future as we expand our sales and marketing efforts and continue to invest in research and development of our technologies,” the company said in the SEC document. “These efforts may be costlier than we expect, and we may not be able to increase our revenue to offset our increased operating expenses.
“Our revenue growth may slow or our revenue may decline for a number of other reasons, including reduced demand for our services, increased competition, a decrease in the growth or size of the ride-sharing or car-sharing market or any failure to capitalize on growth opportunities,” HyreCar continued.
“Any failure to increase our revenue as we grow our business could prevent us from achieving or maintaining profitability. If we are unable to meet these risks and challenges as we encounter them, our business, financial condition and results of operations may suffer,” the company added.
HyreCar acknowledged that it faces “intense competition” stemming from rapid changes in technology, customer requirements, industry standards and frequent new service introductions and improvements.
“We anticipate continued challenges from current competitors, as well as by new entrants into the industry,” HyreCar said. “If we are unable to anticipate or effectively react to these competitive challenges, our competitive position could weaken, and we could experience a decline in our growth rate or revenue that could adversely affect our business and results of operations.
As of March 31, HyreCar reported its historical net tangible book value stood at $4,653,105, or $0.38 per share of common stock. The company explained net tangible book value per share represents the book value of its total tangible assets less the book value of our total liabilities, divided by the number of shares of our common stock outstanding.
HyreCar pointed out the public offering price of $3.35 per share is based the last reported sale price of our common stock on the Nasdaq Capital Market on July 12.
Relationships with Lyft and Uber
Along with offering sensitive financial details, HyreCar also divulged its relationships with Lyft and Uber through the SEC filing.
“Although we have deployed drivers and cars to the systems of both Uber and Lyft since our operations began in 2015, there is currently no formal contractual relationship in place with either company,” HyreCar said. “On May 17, 2017, we announced an arrangement with Lyft that allows us to activate our drivers through Lyft’s sign-up portal. However, this is an oral arrangement that has not been memorialized in a written agreement. Consequently, each of these relationships could be discontinued at any time.
“In addition, virtually all of our revenue is generated by cars and drivers operating on both the Uber or Lyft platform and therefore this concentration represents a high degree of risk to us and to potential investors,” HyreCar continued.
“Our business and future growth is significantly dependent on the continued success of each of Uber, Lyft and other software-based systems that have come into the marketplace to compete with standard taxicab transportation organizations,” HyreCar added.
“While the effect of those companies has been to decrease the cost and therefore increase the utilization of ride-sharing, there can be no assurance that consumer utilization of these systems will continue to grow, or that competition and the resulting price pressure will not undermine the viability of these types of systems, thereby adversely affecting our business,” HyreCar went on to say.
HyreCar also mentioned Lyft and Uber when mentioning that its unique peer-to-peer structure could be duplicated by another technology company.
“Although to date neither Uber nor Lyft have endeavored to develop a peer-to-peer system to match drivers and car owners as we are doing, there can be no assurance that either one of these companies or other competitors subsequently entering the marketplace will not endeavor to do so, and there can be no assurance that such competition will not have a negative impact on our business,” HyreCar said.
“Furthermore, although several attempts to match up fleets of cars owned by operators with Uber and Lyft drivers have failed, there can be no assurance that other entities will not enter the marketplace on this basis with economic and logistical models that solve the problems that caused this failure,” HyreCar went on to say.