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Rover: Capitalizing On The Pet Care Services Super Niche

May 03, 2021 3:58 AM ETRover Group, Inc. (ROVR)20 Comments
Riyado Sofian profile picture
Riyado Sofian


  • Rover is going public through a SPAC merger, valuing the company at $1.63 billion.
  • Pet adoption surged during the pandemic, offering growth opportunities for the underpenetrated pet care services subindustry.
  • Rover's business model seemed to be un-Amazonable, un-Uberable, and un-Fiverrable.
  • Rover's market leadership in a highly niched category will serve as a moat against the competition.

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Photo by Solovyova/iStock via Getty Images

Investment Thesis

In a time of great uncertainty and stress, many home dwellers turned to pets to keep them company during this struggle. As a result, pet adoption rates surged, providing a catalyst for the pet care services industry to grow.

This article was written by

Riyado Sofian profile picture
My goal is to help you find the companies of tomorrow.I am a long-term growth investor in search of innovative companies that make the world a better place. My investment strategy revolves around finding what I call "divergent stocks" — disruptive companies that have strong fundamentals and long growth runways, but depressing prices.You can find me on YouTube as well:https://www.youtube.com/@riyadosofian

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (20)

Maschuette profile picture
Sell, Sell, Sell - I just saw an SEC document this morning that they company is going to do an equity offering. I just got my butt kicked a month ago or so from a very similar situation. A SPAC i bought was doing an equity fund raising a few months after merger and they cut the price in half.
Maschuette profile picture
@Maschuette This is kind of a weird S-1 after looking at in more detail. It is basically a way for the original shareholders to get out of this company now and not have to wait for the lock-up time to expire. The company doesn't get the money from this offering, it just buys out the original investors:

"SEATTLE, Nov. 09, 2021 (GLOBE NEWSWIRE) -- Rover Group, Inc. ("Rover") (NASDAQ: ROVR), the world's largest online marketplace for pet care, today announced that it has confidentially submitted a draft registration statement on Form S-1 with the Securities and Exchange Commission (the "SEC") relating to a proposed public offering of its Class A common stock. All of the shares will be sold by stockholders of Rover that were investors in A Place for Rover, Inc. ("Legacy Rover") prior to its merger with Nebula Caravel Acquisition Corp. and are subject to restrictions on the resale of the shares they acquired in connection with the merger. Rover will not receive any proceeds from the sale of Class A common stock by the selling stockholders. Legacy Rover stockholders that are subject to such restrictions and hold at least 50,000 shares of our Class A Common Stock as of November 1, 2021 (subject to certain exceptions) will be given the opportunity to participate in the secondary offering. All other Legacy Rover securityholders that are subject to such restrictions will be released from the transfer restrictions to the same extent as those that choose to participate."
Maschuette profile picture
@Maschuette Well it seems no one on Seeking Alpha is investing in ROVR anymore. Just talking to myself...lol. Anyways, this news just broke today. 1 week after i saw it. Booyah!
bazooooka profile picture
@Maschuette yup; but when to buy back if ever?
From their earnings release:

*) "Revenue of $24.5 million, compared to $23.8 million, an increase of 3%."
*) "Gross bookings value (GBV) of $134.1 million, compared to $113.9 million. "

Can someone help me understand what GBV is?
How is it possible that revenue is less than GBV?
@alphatraz GBV = Gross Bookings Volume = the value of all transactions between dog owners and dog sitters on the platform. Revenues = the take rate * GBV = the fee that sitters pay to Rover for using the platform as a percentage of each transaction.
One worry I have with Rover is that many sitters are stay at home workers themselves and as they start to go back to work, will they have time to take a dog? so will number of sitters fall?
kickered profile picture
@EWM18 great question
Ferran Casarramona profile picture
The weak point in this bussiness model is once one owner gets confidence in one pet care provider, he can contact it directly, saving in Rover.com fees.

Unlike AirBnB where customers want to change destinations form one travel to another, Rover customers want to repeat the same care provider, giving to providers a high bargaining power.
Riyado Sofian profile picture
@Ferran Casarramona I agree with you to a certain point. Keep in mind that pet owners might want more peace of mind by booking through Rover - the service provided will be backed by The Rover Guarantee. as opposed to under-the-table, which has none.
@Ferran Casarramona, yes true but the AI (algorithms) in the rover algorithm punishes any user they suspect of taking business off the platform. to keep your search rankings high, it highly encourages people to stick on the platform. power users want to keep their search rankings high Also, the insurance from both points of view is a strong plus. lastly many pet parents travel w pets and thus have similar needs to use the platform in different locations. hope this helps
jdjacobson7 profile picture
Agree this appears to be a compelling, underfollowed investment opportunity trading at/near institutional par value. The last investment call they had, I asked if they would consider subscription based pet goods model in addition to their existing business (similar to barkbox) - they haven’t thought of it yet but that would be a great sticky revenue stream.

Any updates on conversion date for ROVR, I have not found anything yet?
Riyado Sofian profile picture
@jdjacobson7 That would be a nice addition to their main value prop but I wouldn't bet that it'll be a home run success for them. I rather have Rover stick to their core value prop for now.

As for the merger date, the press release mentioned some time in the first half of 2021, so expect a ticker change in the next two months.
@jdjacobson7 I like that mgmt has the focus to attack its current market and not trying to be everything to everyone. Subscription pet boxes already exist and rover mgmt is better spending time and effort on their core competency and unmet need IMHO.
Looks like they are doing a beta launch of selling pet products. How does that factor into your analysis?
Riyado Sofian profile picture
@EWM18 Selling pet products does not change my investment thesis. While that can diversify Rover's revenue stream and maybe increase customer lifetime value, I'd focus on their core value proposition for now.
@Riyado Sofian agree. prefer they focus.
nice article. Any sense of when the merger is closing?
Riyado Sofian profile picture
@brianbode Thank you. The press release mentioned some time in the first half of 2021, so I expect the deal to close in the next two months.
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