Sonder at risk of delisting from Nasdaq

Hospitality company Sonder is at risk of being delisted from the Nasdaq Stock Market because its common stock has been below $1 per share for 30 consecutive business days.

In a filing with the United States Securities and Exchange Commission on Tuesday, Sonder said it received the warning from Nasdaq on Friday.

The company has 180 calendar days – by Oct. 18 – to get in compliance, which means that its common stock must be at least $1 per share for a minimum of 10 consecutive business days during the grace period.

If the company does not regain compliance, it may be eligible for an additional 180 calendar day compliance period if it elects to transfer to the Nasdaq Capital Market.

However, according to the SEC filing, if Nasdaq determines “the Company will not be able to cure the deficiency or if the Company is otherwise not eligible, or if the Company’s common stock has a closing bid price of $0.10 or less for ten consecutive trading days during any such compliance period, Nasdaq would notify the Company that its securities would be subject to delisting.”

In that case, Sonder can appeal that decision.

Sonder went public in January 2022 via a special purpose acquisition company. Founded in 2012, the San Francisco-based accommodation platform says it has approximately 9,000 units live worldwide.

The Nasdaq notice follows a March earnings call in which Francis Davidson, Sonder’s co-founder and CEO, said growing corporate business is one priority for 2023.

“This year we plan to continue expanding into new industry segments and expect another year of strong growth within the corporate business, which will bolster weekday RevPAR [revenue per available room] in particular, an area with still a lot of upside,” Davidson said in the call discussing fourth quarter and full-year 2022 earnings.

The company also said it was focusing on its cash flow positive plan, which it announced in June. For the fourth quarter, Sonder reported a free cash flow loss of $30 million, which compared to a loss of $39 million in Q3 2022 and a loss of $62 million in Q1 2022.

Sonder hopes to achieve its first quarter of positive free cash flow in 2023, Davidson said in the earnings call.

Sonder Holdings said it booked $70 million in corporate sales in 2022 – a fivefold increase over 2021. Sonder attributed its growth to having a presence on the global distribution platforms as well as salespeople on the ground.

Sonder reported a 56% increase in revenue to $135 million in Q4 versus the same quarter in 2022. RevPar improved 11% to $158 year over year and the average daily rate dipped 7% to $191. Sonder estimated its Q1 2023 revenue would exceed $110 million, representing a 37% increase year over year.

Sonder Holdings in June laid off 21% of its corporate employees and 7% of its front-line staff as part of a restructuring designed to increase its cash flow.

When contacted for comment, Sonder Communications said, “Our position and intention to comply to the best of our abilities is outlined within” the SEC filing.