Shared electric micromobility giant Lime has closed a $523 million raise in convertible debt and term loan financing, money that Lime CEO Wayne Ting says is the next step on the company's path to going public next year. Lime will use the capital to invest in its decarbonization efforts, refresh a significant portion of its fleet with its Gen4 e-bikes and e-scooters, scale into more cities and develop new technologies that will help win additional city RFPs.
"This was a very oversubscribed round, and I think it really does underscore the renewed interest in micromobility as a sector, and more importantly, the recognition that Lime is the undisputed leader in this space," Ting told TechCrunch. "Companies typically do a convertible note as the last round before they go IPO and investors are betting that the company is going public, and they want to get in on the round early because they get to come in at a discount. And we certainly think the fact that you know, over $400 million of investment coming in is a real great milestone as we look towards taking Lime public next year."
Of the total funding amount, $418 million is made up of convertible debt led by Abu Dhabi Growth Fund, Fidelity Management & Research Company, Uber and certain funds managed by Highbridge Capital Management. That debt will convert into shares automatically when Lime goes public. The remaining $105 million comes in as a senior secured term loan facility from the private credit group UBS O'Connor. Lime would not reveal the terms of the loan.
Fidelity and Uber are among Lime's largest previous investors. In 2019, Fidelity was one of the leading investors in Lime's $310 million Series D, and last year, Uber led a $170 million down round for Lime as it struggled with pandemic woes, a deal that saw Lime acquire Uber's micromobility subsidiary Jump.
This announcement, coupled with Lime's stated intention to go public next year, comes as competitor Bird enters the markets via a SPAC deal with Switchback II Corporation. Ting didn't specify when next year Lime would file for IPO or whether it would go the traditional route or attempt a SPAC merger, but sources familiar with Lime say it's unlikely the company will pursue the SPAC route.
"Our goal is to make sure we have enough capital to achieve our mission, which is to build a transportation alternative that is shared, that is affordable, that is green," said Ting.
Earlier this week, Lime had its carbon targets validated by the Science-Based Targets Initiative, an organization that promotes best practices in emissions reductions in line with climate science, and announced that it is working toward being consistent with the Paris Climate Accord and being net-zero by 2030. The company is dedicating $20 million of its latest round toward decarbonization efforts, such as investing in cleaner hardware and ensuring that 80% of its supply chain sets better emissions goals. Capital goods, which includes the vehicles themselves, including all of the extraction of materials and production that goes into them, make up 44.3% of Lime's total emissions, according to the company's carbon targets report. Pre-purchased goods and services, which consist of scooter parts and warehouse expenses, make up 25.8%.
"I want to show tangible results through capital investments to change our operations, to pushing our suppliers," said Ting, who also said Lime would not continue to work with suppliers that don't have their own carbon targets in the hope that other companies also pressure manufacturing partners to make similar commitments. "We mean business when we talk about decarbonization and transportation. When we do become a public company, I want our investors to know that that's what this company stands for."
Lime will primarily use the funds to double down on its existing city permits, deepening its relationships in the markets in which it already resides. That could look like building new vehicle modes or investing in technology "that actually makes us good partners to cities as we expand and scale our business," said Ting, but he didn't specify what new modes or technologies Lime is exploring.
However, last month Ting mentioned that Lime is interested in joining the sidewalk detection technology club during a WSJ tech event, at which time the CEO also claimed that Lime is third quarter EBITDA profitable for the second time. Lime was able to reach this level in large part through bottom line growth, meaning the company is running a tight ship. But COVID has continued to affect new ridership and top line growth, despite the fact that the operator launched 80 contracts this year.
The main use cases for Lime, commute and tourism, are slowly starting to creep back. The United States just announced that it would lift the travel ban for Europeans who have been double vaccinated. Expanding into new cities is also on Lime's roadmap pre-IPO. Ting said Lime is targeting North American and European expansion, but is also interested in looking toward the Middle East, where the company's lead investor in this round is based.
"We've actually seen that we've grown our intercity travel by a ton, and in 2021, our revenue is going to be back to 2019 pre-pandemic levels," said Ting. "People are looking for a safe, affordable, single passenger way to move, and a lot of people have shifted their ridership onto micromobility platforms like Lime. When I look towards 2022, we have an opportunity to deepen that relationship with riders."