This fund run by a SAC Capital alum bought restaurant stocks amid the pandemic
Prentice Capital Management was up 6.6% for the first four months of the year, compared to the S&P 500's 9.3% decline and the Russell 2000's 21.1% decline. The HFRX Equity Hedge Index was down 9.4% for the quarter. Q1 2020 hedge fund letters, conferences and more Gross and net exposures In his first-quarter letter to […]
Care.com Inc (NYSE:CRCM) is soaring this morning up about 39 percent at the time of this writing – why? Google Inc. (NASDAQ:GOOGL) just made a big capital injection into the family care company. Below is that the analysts are saying about the latest news.
Yesterday, Care.com announced that Google Capital made a $46.35mm investment in the company (versus the company’s market capitalization of $268.4mm at the close). The transaction marks Google Capital’s first investment in a public company and makes it Care.com’s largest shareholder. A portion of the proceeds will be used to repurchase $30.5mm worth of shares from Matrix partners. In addition, Laela Sturdy, a Partner at Google Capital, will gain a seat on Care.com’s Board of Directors. We view the investment as a vote of confidence in the platform. Care.com has executed well over the last year achieving profitability ahead of expectations and aims to sustain profitability going forward.
What does this mean for CRCM? Google Capital’s infusion should enable CRCM to invest to grow their business, while CRCM also gains access to Google Capital’s resources/expertise. We continue to have concerns about CRCM’s high churn rate, short customer life-cycle, and required high
marketing intensity. As such, it will be important to monitor whether Google Capital and the addition of Laela Sturdy can improve Care.com’s forward growth trajectory.
Economics of the deal. The $46.35 million investment at a $10.50 conversion price equates to ~4.4M shares to Google Capital, which when offset by the 3.7M buyback nets to an incremental 700k shares outstanding. By our math, this will put Google Capital’s initial stake at ~13% and will be immediately dilutive to EPS by ~2%. Over the 7-year period, our math shows Google Capital’s stake increasing to ~20% of total equity and resulting in slightly higher dilution of ~8%.