Remember Wag? The dog-walking app made huge waves back in 2018 when it raised $300 million from SoftBank’s Vision Fund.
Competing with rival Rover, Wag’s service fell out of our minds in the years since its mega-deal. Today, Wag is back in the news thanks to a recently announced SPAC deal that will take the company public.
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This means we get a look inside the machine.
In basic terms, Wag’s results detail a company that took blows during the pandemic as folks stayed home, meaning that they needed external dog care less than before. But, with its results ramping up, Wag expects to continue its recovery thanks to workers heading back to the office this year. The office-return dynamics make Wag’s forward-looking projections very interesting.
Let’s hammer through the SPAC deal terms and then look at Wag’s historical results and what it expects for the future. After all, the return-to-office question will impact a host of companies beyond Wag. From Uber to DoorDash and beyond, a return to more old-fashioned working conditions would rejigger our economy once again.
The Wag deal
Wag is merging with CHW Acquisition Corporation. The deal calls Wag a “vertically integrated technology platform,” notably. The release also states that capital is being provided as part of the deal by “current Wag! and CHW investors,” including “Battery Ventures, ACME Capital, General Catalyst and Tenaya Capital.” That, in a nutshell, is why we care about this deal; it’s a venture-backed company that is still raising venture capital.
In more boring terms, the “transaction values the combined company at a pro forma enterprise and equity value of approximately $350 million,” which isn’t much. Especially given that private capital into Wag to this point is around the same number. The deal, presuming “no redemptions from the CHW shareholders, [will] deliver approximately $175 million in gross cash proceeds to the combined company.”
Shares of CHW Acquisition Corporation trended lower last week, but recovered to $9.82 per share today, a slight discount to the usual $10 per share SPAC price that we tend to see pre-combination. Still, the market hasn’t thrown up its arms at the deal’s concept since its announcement. Why? In part because Wag’s numbers are pointing in the right direction.
A pandemic recovery
To understand Wag’s return to growth, we have to discuss its declines. In short, when the pandemic hit, demand for Wag’s service — dog walking, pet care, etc. — fell off a cliff.