Shift acquires assets of Fair.com
Online car marketplace Shift announced the acquisition of the assets of auto leasing company Fair.com for $15 million in cash and 2.5% equity. The transaction will be fully funded by a $20 million senior unsecured debt facility with a 6% coupon from SoftBank.
Shift’s co-founder and CEO George Arison said in a statement that Shift and Fair share the same goal: to simplify the used vehicle-purchasing process and empower customers through the entire lifecycle of car ownership. He also added that this acquisition is the first step in building out its marketplace vision, enabling them to launch their new capability in the second quarter of the year – “rather than years from now.”
Shift is a San Francisco-based online marketplace for buying and selling secondhand cars. It became a public company in late 2020 after merging with Insurance Acquisition Corp. It generates money every time a car is sold and when people opt for any of the financing and vehicle protection products it offers. Its revenue for 2021 and 2020 was $637 million and $196 million, respectively. Finally, Shift Technologies isn’t profitable but it looks to breakeven “over the next few years.”
Fair.com, on the other hand, began in 2016 when it offered a month-to-month car subscription service in which a user would download an app, take a photo of his driver’s license for pre-qualification purposes, and then choose his monthly payment. The app would then assess the cars in the area and choose the ones with a fair price. The user would choose a vehicle, sign up, and pick it up. The company later pivoted to offer 2-year and 3-year leases for used cars.
Fair went on to raise over $2 billion in total capital through a combination of equity and debt rounds. Munich Re Ventures’ ERGO Fund and Softbank are notable investors. Scott Painter, one of the company’s co-founders, resigned as CEO in 2019 and went on to start NextCar , another car subscription platform. Surprisingly, NextCar is “currently in beta testing” despite being the spitting image of Fair.com. By the way, this is the only Glassdoor review on NextCar.
SoftBank had owned about a third of Fair’s equity, which has been wiped out, according to Bloomberg. Data from Crunchbase highlights that SoftBank and SoftBank’s Vision Fund participated in Fair’s $385 million Series B round announced in 2018 and in its $500 million debt round announced in 2019. Fair’s residual assets, primarily its fleet business, will provide some value to SoftBank, but not enough to compensate for the money it invested in the company. Also, Fair is selling that fleet business and its existing contracts with drivers but those transactions have not yet closed. Fair also has less than $75 million in cash which will be used to repay part of SoftBank’s debt.
Bottom Line: Fairness is a subjective feeling .
