Why Rover’s $2.3B sale price makes good sense

And why not every SPAC is a dog

Rover is going private in a $2.3 billion, all-cash sale to Blackstone, the company announced earlier this week. The pet care–focused company raised hundreds of millions of dollars while private, through a Series G, and later went public via a SPAC. Notably, unlike a great many SPAC combinations, Rover is proving that blank-check businesses are not merely a way to incinerate wealth.

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The former startup has a 30-day shopping provision built into its deal with Blackstone, meaning that other offers may come to the fore. However, with the private equity group paying a stiff premium for Rover shares — 61% more than the company’s 90-day volume weighted average share price, per a release — that doesn’t sound too likely.

The Rover deal is expensive but it has some notable caveats that tell us quite a lot about the state of the market for tech, and tech-enabled, businesses. I’ll bet you didn’t expect a pet-focused e-commerce marketplace to earn an 8.7x revenue run rate multiple in 2023!

This morning I want to dig into why I think Blackstone is paying so much for Rover, what we can glean from that research for other startups, and why a select few SPAC’d public businesses that are trading like literal dogs may be bargains for the right buyer.

That price tag isn’t unreasonable

Rover and Blackstone announced their transaction after we got the former company’s Q3 2023 results, meaning that we have pretty up-to-date figures concerning its recent performance.

Rover reported third-quarter revenues of $66.2 million, up 30% from the same period one year ago. The company also flipped to GAAP net income, and told investors that it intended to buy back more of its own shares. It also beat guidance in the quarter.