Last week, HyreCar (HYRE:NASDAQ) sold shares at $3. I have to admit, this came as a total surprise to me. With HyreCar going cash-flow neutral in the second quarter, I had been operating under the assumption that they wouldn't need to raise money anytime soon. Turns out that I was wrong.
Which is not to say that adding capital to their balance sheet wouldn't be a good idea. Yes, HyreCar is growing close to 100% year-over-year, but they have a huge market opportunity in front of them and having additional capital would enable them to grow faster.
More importantly, and what I missed, was that the original equipment manufacturing (OEM) partners they were wooing all noticed the lack of meaningful cash on the balance sheet. When you are looking to partner with major companies like Mitsubishi and Ford, two potential OEM partners whose names have been bandied around for a while, you have to have the resources available to fund programs.
That's really what caused HyreCar to raise money, now at a valuation much lower than we had seen just this spring. Their OEM trials are going well, but to go to the next level, they needed to have more capital.
Thus, investors are having to suffer through dilution at this time so that HyreCar can position themselves as a bigger player in the space—a space, Mobility-as-a-Service, that is growing rapidly and coming of age in real time.
HyreCar is in the middle of what could best be described as a land grab. For the company to be a long-term winner, it needs to gain market share as fast as possible, as size will turn it into one of the essential players in the space.
Now that this dilution is behind us, what can we expect to see as benefits? Starting with the potential OEM partners, I would suggest it's likely that we see a pilot (or two?) turn into a full-fledged partner in the not too distant future. This financing is a critical step toward that happening.
I also believe that HyreCar is better positioned to work with the two industry giants of Uber and Lyft. As HyreCar grows, they will become a much likelier partner for programs within these companies. Uber, in particular, seems like a likely potential partner through, as HyreCar could be a potential Official Vehicle Solution on their platform. The growth potential out of this could easily justify the dilution.
Finally, I expect we will see more Wall Street research on HYRE. This financing was well received by investors, and it is likely the company will get some additional coverage as a result.
All in all, I'm OK with the financing. It was obviously not a secret to all, as the stock was hit hard prior to the deal. It's unfortunate that the company was forced to sell stock at $3/share when it had been over $8 just a few months ago. However, that's the past.
Looking forward, HyreCar has just positioned itself to be a stronger competitor in this growing field. With the dilution behind us, investors in HYRE could be well positioned for a lengthy stretch of positive news flow.
Daniel Carlson is the founder and managing member of Tailwinds Research Group and its parent company DFC Advisory Services, which is a licensed registered investment advisor (CRD # 297209). Tailwinds is a microcap focused research company that provides research on and consults to over 20 emerging growth companies in the technology and life sciences arenas. DFC Advisory Services is an RIA that manages money dedicated to investing in the companies covered by Tailwinds. For more information on these two companies and their track record, please see www.tailwindsresearch.com. Prior to founding these two entities, Dan spent many years working with small public companies, having been CFO of two public companies and helping finance many others. A 1989 graduate from Tufts University with a degree in Economics, Dan’s formative years in business were spent as an equity trader, first on the Pacific Coast Stock Exchange then on the buyside at several multi-billion dollar firms.
This article was submitted by Tailwinds Research. For more information on Tailwinds Research or on HyreCar, please visit www.tailwindsresearch.com.
Tailwinds is engaged by HyreCar and owns stock in the company. For a complete list of disclosures, please click here.
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