With Chico, Olive, and Roxie at the podium and dozens of other dogs joining virtually, Seattle-based Rover rang Nasdaq’s opening bell Monday, making its stock market debut.
Rover, an online marketplace for pet-care services, began trading under the ticker “ROVR” after completing a merger last week with San Francisco-based shell company Nebula Caravel.
The listing raised $270 million in additional cash for the company. The stock closed 6% higher than its debut price Monday.
The company first announced the deal in February. Rover’s investor presentation revealed the pandemic halved the company’s revenue from 2019 to 2020. Last year was made even more difficult when the company laid off 41% of its employees.
The company did reduce its net loss to $24 million in 2020, from $35 million the year before. Despite projecting revenue this year will return to 2019 levels, the 10-year-old company does not expect to make a profit until 2022.
Rover makes money when dog and cat owners seek pet-care services on its platform from a pool of pet sitters. Pet-care providers can offer dog walking and doggy day-care services when owners are at work, and house sitting and drop in visits when owners are on vacation. Sitters set their own rates, but Rover takes a 25% cut of all transactions.
When the pandemic locked pet owners at home, Rover’s business suffered. “In the short term, it hurt us.” CEO Aaron Easterly said. “People didn’t travel. People didn’t go to work.”
Surging pet ownership during the pandemic may offer the company a second wind. Pet ownership in the United States rose to 70% of all households last year, the highest it has ever been, according to the American Pet Products Association. Since the onset of COVID-19, more than 1 in 5 people bought new pets, many citing loneliness.
Total bookings in May were up nearly 20% compared to two years before. In June, Rover recorded $56 million in transactions on its platform, the most it has ever seen.
“People are just willing to spend more and more to ensure that their pets are cared for and given premium-type care and experiences,” said Tom White, a senior equity research analyst at investment bank D.A. Davidson, offering one explanation for the spending.
In 2017, Rover acquired California-based DogVacay, giving pet owners access to what it said was the largest network of pet-care providers across the United States and Canada. In 2018, the company acquired DogBuddy to accelerate its presence in Europe.
“We sit at the intersection of a bunch of amazing trends,” Easterly said. “Pet ownership tends to grow over time and ‘spend per pet’ tends to go up over time.”
According to Rover, it now operates in 96% of U.S. ZIP codes,” and in 10 countries across North America and Europe.
White’s firm estimates that “overnight services” for pets, or anything nonmedical, are a $9 billion market. But with only 10% of pet owners paying for these services, D.A. Davidson’s report projects the market could grow tenfold by 2030.
The company’s recent spike in bookings has not come without growing pains. Reports have recently surfaced that pets cared for using Rover’s platform have been lost, hurt, or in some cases, found dead while in the possession of sitters, according to local news outlets around the country. The Seattle Times was unable to verify these accounts.
Easterly said safety has been the company’s priority since day one, and he pointed to the company’s 24/7 support line for pet sitters as one measure the company has taken. Sitters can access the line at any time if they have questions about how to care for a pet. The line also offers access to veterinarians if sitters are concerned about the pet’s health.
The company also said sitters go through background checks before being approved to offer its services. And bookings come with insurance coverage for unplanned events or out of pocket expenses that sitters may incur.
Still, “the job is never done in terms of what we can do better,” Easterly said.
White, who focuses on internet marketplaces, said these safety risks are not unique to Rover but are an unfortunate reality for online platforms of this kind. “I see that in a lot of other gig-type business models that I cover like in ride sharing or Airbnb … Unfortunately, [Rover] is never going to be able to eradicate it completely.”
Ivan Feinseth, chief investment officer at New York-based Tigress Financial Partners, said he still sees opportunity in the way Rover consolidates a “very fragmented market of random service providers” that mostly consists of family and friends.
Moving forward, the company is seeking to expand its offerings. In Seattle, Denver, Austin, and Washington D.C., Rover has begun piloting services such as bathing, blow drying, ear cleaning, nail trimming, and even haircuts for pets.