1 damaged SPAC share for sale


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It’s hard to deny owl‘S (NYSE: OWLT) The move to public markets went as planned. A merger of SPAC with Sanbridge aimed to raise $ 325 million in cash, including $ 130 million from PIPE (private investment in public equity) investors. But Sandbridge’s stock fell below $ 10 a share, and most investors chose to redeem their shares instead of buying shares of Owlet. As a result, Owlet ended up adding just $ 135.7 million in funds from PIPE and SPAC.

Since the SPAC merger officially closed in July, shares have continued to decline and currently trade at $ 5.64, giving the company a market cap of approximately $ 766 million. With the SPAC merger in the back, I think investors need to rate Owlet as a public entity, and I think it’s very good about this child health company.

Image source: owl.

Owlet is already a growth machine

Owlet was a fast-growing company even before it received $ 135.7 million from public investors. The full year forecast is for revenue of $ 107 million, gross margin of 54% to 55%, and an adjusted EBITDA margin of minus 24.5%. That’s an improvement over 2020, when revenue was $ 75.2 million and gross margin was 47.5%.

In its presentation to investors, Owlet’s management said it expected sales to grow to $ 1.06 billion with an EBITDA margin of 15.8%. That may be very optimistic, but there’s a lot to like about Owlet’s business for the next several years.

Unleashing the true potential of Owlet

To date, Owlet has been primarily a US company whose business is primarily based in the Midwestern states. In addition to expanding its U.S. supply chain, Owlet can grow internationally, potentially increasing its addressable market by more than seven times.

Management estimates that approximately 25 million children are born in the United States each year, the market it serves today. The next step will grow in Europe, where 30 million children are born every year. In 2022 Owlet plans to expand into Asia, where 97 million children will be born. Latin America will follow in 2024 with its 60 million children born every year. International expansion should be a major growth driver even without new products, but these are also on the way.

The Smart Sock is Owlet’s core product and is likely to drive adoption of the company’s products further. But complementary products like the Duo Babyphone, a belly band for pregnant mothers to monitor the baby’s heartbeat, which is in beta, and a light and sound machine called Soothe, which is in development, are added.

As the product ecosystem grows, Owlet creates a valuable record of every baby. This could be of crucial importance for the long-term connection to telemedicine. Automatic alerts could be sent when a child’s condition changes, the app could be linked to a telehealth service, and data could be sent to a family doctor before visits. Owlet hasn’t rolled out its telehealth services yet, but given the discomfort of new parents when their baby is sick, it’s a natural added value of software-as-a-service given the data feed already in place.

Regulators could help Owlet

Owlet is also trying to grow its market by making it a standard product cleared by insurers and the FDA. The Owlet sock is currently going through FDA marketing approval; The company hopes it will be covered by parental insurance at some point.

The company is also seeking FDA approval for a BabySat product specifically for sick babies who need more surveillance.

Receiving the stamp of approval from the FDA is a step towards being standard like a breast pump when leaving the hospital with a new baby, and that could quickly open the market for Owlet.

Look past the SPAC merger

There were clearly flaws in the SPAC merger process. Maybe the company was overvalued or investors didn’t like the lockup rules. But right now Owlet has a market cap of $ 766 million, $ 135.7 million in new cash, only $ 15 million in debt, and a fast growing business.

If Owlet can come anywhere near its growth potential, this could be an incredible stock to own for the long term. There are no guarantees of performance, but as a parent with two young children who have realized the value of Owlet’s products, this is the type of technology that I believe will be standard in ten years – and Owlet is clearly in a leading position .

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.

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