Blackstone Finds a Diamond in the Ruff With Rover

Woof! There is deal-making going on out there that doesn’t have to do with artificial intelligence (unless of course you mean animal intelligence). Blackstone’s $2.3 billion purchase of pet-sitting marketplace Rover Group, unveiled Wednesday, demonstrates that Rover is that rarest of gems, a company that went public via a SPAC merger and turned out not to be a dog. SPACs, as you might remember, are those cashed-up shell firms known as special purpose acquisition companies. Many businesses that have gone public via SPAC mergers haven’t done well (see: BuzzFeed). In contrast, Rover is growing at a healthy clip—revenue rose 36% in the first nine months of this year, after growing 58% in all of 2022. And it was even generating a little cash, enough to buy back shares. 

Plenty of Rover’s shareholders will be happy at the sales price. Blackstone is paying $11 a share. That’s not a terrible return for early investors in the SPAC, which went public at $10 a share in late 2020. While the stock rallied above that briefly after the Rover merger in mid-2021, it traded in the $3 to $4 range for most of 2022 and up until this past summer, when it began to rally.  It closed at $8.50 on Tuesday. In hindsight, Rover—essentially Airbnb for pet boarding—was obviously a bargain. On a forward sales multiple, it was trading at less than half as much as Airbnb until recently, according to Koyfin data. Notably, Blackstone’s offer implies a forward sales multiple of 8 times, above where Airbnb is trading today. (Read our 2019 interview with Rover’s CEO, Aaron Easterly, here.)