Lime announced today that it raised $523 million in debt financing, a sign that investors are feeling more optimistic about the long-term survival of shared electric scooters in a post-pandemic world. Lime must be feeling more optimistic, too, because a spokesperson confirmed that the company plans on going public sometime in 2022.
Last September, Insider reported that Lime was hoping to raise up to $200 million in convertible debt from Uber and other previous investors. The scooter company was also reportedly in talks with investment bank Evercore about going public via a reverse merger with a special acquisition company, or SPAC, but Insider says those talks fizzled.
Now, Lime says that its most recent funding round was oversubscribed, with $418 million in debt financing led by Abu Dhabi Growth Fund, Fidelity Management & Research, Uber, and certain funds managed by Highbridge Capital Management. The company also received a $105 million senior secured term loan facility from a private equity group at UBS O’Connor. (These bank loans are typically made to companies that have below investment-grade credit ratings.)
Lime is not releasing details about interest rates or anything else related to the terms of the deal, the spokesperson said. The company also declined to reveal whether it plans on going public by merging with a special acquisition company (SPAC) or a traditional initial public offering.
The past two years have been a rollercoaster for Lime and the shared scooter industry as a whole. The company’s ridership dropped 95 percent as a result of the pandemic. While the world was locked down, Lime made a crucial investment deal with Uber and others for $170 million to take over the ride-hailing company’s bike and scooter business Jump.
In the fall of 2020, the company was feeling more optimistic, having hit the milestone of 200 million rides worldwide. Lime CEO Wayne Ting told a crowd of investors in November that for the first time the company was operating cash flow positive and free cash flow positive in the third quarter and was on pace to be full-year profitable, excluding certain costs, in 2021. (Being cash flow positive means Lime has more money going into the business at a given time than going out. But it’s not the same as having net income or being profitable after adjusting your earnings for interest and taxes, also known as EBIT.)
Then the Delta variant hit, which led to more lockdowns and delayed reopenings. Now, a spokesperson wouldn’t confirm whether Lime was still on pace for a full year of profitability, even though its last quarter was EBIDTA (earnings before interest, depreciation, taxes, and amortization) profitable. (Its Q3 2020 was also EBITDA profitable.)
Even though it has proven popular with riders, scooter sharing’s early years were marked by steep losses. Most companies relied on a hefty dose of venture capital to keep their operations afloat. The industry struggled to fix its unit economics, in which the purchase price for each scooter exceeded the amount of revenue it brought in before eventually breaking down.
The original scooters deployed by companies like Bird and Lime — mostly sourced from Chinese companies like Xiaomi and Segway-Ninebot — weren’t built for shared use, so they were prone to breakdowns, often within weeks of being rolled out. But over the last several years, the scooter companies have taken pains to roll out better, more durable scooters in order to increase the average life span and improve their unit economics.
Going public would certainly help raise cash in the near term, but it also carries big risks. Lime’s main rival, Bird, recently went public via a SPAC merger that valued the Santa Monica-based company at $2.3 billion. That deal just closed, and as soon as they were publicly listed, shares in the newly merged company fell sharply.
But while Bird relies on its business model of sending fleets of scooters to small operators to handle deployment and charging, Lime will likely rely on its scale and global status to attract investor interest. The company claims to be the top scooter operator in the US and Europe. It hit 250 million rides over the summer (recall it was at 200 million a year ago) and recently rolled out the fourth-generation version of its electric scooter.
“This oversubscribed round is a testament to the strong business we’ve built and the overwhelming confidence we’ve received from the financial community,” said Ting in a statement. “This investment will allow us to double down on our newest generation of e-bikes and e-scooters, as well as additional modes, to ensure people have reliable access to affordable, shared, carbon-free transportation.”
Update November 5th, 11:38AM ET: Lime has had two EBITDA profitable quarters: Q3 2020 and Q3 2021. A previous version of this story misstated that.