8-K: Getaround Secures $20 Million in Additional Funding and Appoints Interim CFO

Getaround has secured an additional $20 million in funding from Mudrick Capital and appointed Patricia Huerta as Interim CFO, effective July 19, 2024.

Summary

• Getaround amended its super priority secured promissory note with Mudrick Capital Management, increasing the principal amount by $20 million to a total of $83,674,931.
• The amended note includes the original principal of $61,677,504, accrued interest of $1,997,427, and the new $20 million capital injection.
• The note accrues interest at 15% per annum, increasing to 17% upon an event of default, and matures on August 7, 2026, with a repayment of 108% of the principal and accrued interest.
• Getaround may request an additional $10 million under the note, subject to certain conditions.
• The company's CFO, Tom Alderman, has departed, and Patricia Huerta, the Chief Accounting Officer, has been appointed as Interim CFO, effective July 19, 2024.
• Ms. Huerta has over 25 years of experience in finance and public accounting, including previous roles as CFO and CAO at Good Food Holdings, LLC.

Sentiment

Score: 4

Explanation: The document indicates financial strain due to the high interest rate on the debt and the requirement to prepay the note with proceeds from a sale. While the additional funding is positive, the overall sentiment is negative due to the financial challenges and leadership transition.

Positives

• The additional $20 million in funding provides Getaround with crucial capital.
• Patricia Huerta's appointment as Interim CFO brings extensive experience in finance and accounting.
• The company has the option to request an additional $10 million in funding.

Negatives

• The promissory note carries a high interest rate of 15%, increasing to 17% upon default.
• The company is required to prepay the note with 100% of net proceeds from a sale of the company or its subsidiaries, with a limited exception for the first $10 million.
• The departure of the CFO, Tom Alderman, may cause some disruption.

Risks

• The high interest rate on the promissory note could strain the company's finances.
• The requirement to prepay the note with proceeds from a sale could limit strategic options.
• The change in CFO leadership could create uncertainty in the short term.
• The company's debt is secured by substantially all of its assets, increasing risk for shareholders.

Future Outlook

The company aims to streamline internal processes, reduce costs, and drive the company to profitability. The additional funding is intended to support these efforts.

Management Comments

• Patricia Huerta stated her focus will be to streamline internal processes in the accounting, finance and reporting areas and help reduce costs to drive the company to profitability.
• Eduardo Iniguez stated that Patricia Huerta is an experienced CFO and CAO with a demonstrated track record of success in high-growth, entrepreneurial companies.

Industry Context

The car sharing market is competitive, and Getaround's ability to secure additional funding and streamline operations is crucial for its long-term viability. The appointment of an experienced interim CFO is a positive step towards improving financial management.

Comparison to Industry Standards

• The 15% interest rate on the promissory note is high compared to typical corporate debt, suggesting Getaround is facing financial challenges and has limited access to lower cost capital.
• The requirement to prepay the note with 100% of net proceeds from a sale is unusual and indicates a high level of risk for the lender, Mudrick Capital.
• Other car sharing companies such as Turo have raised capital through more conventional means, such as equity financing, which does not place the same level of burden on the company's cash flow.
• The appointment of an interim CFO is not uncommon in companies undergoing financial restructuring, but the lack of a permanent CFO could create uncertainty for investors.

Management Changes

Stakeholder Impact

• Shareholders face increased risk due to the high-interest debt and the company's financial challenges.
• Employees may experience uncertainty due to the CFO transition.
• Customers and car owners may be indirectly affected by the company's financial situation.

Next Steps

• Getaround will focus on streamlining internal processes and reducing costs.
• The company will work to achieve profitability.
• The company will determine the impact of the new position on the existing compensation arrangements with Ms. Huerta.

Key Dates

Keywords

funding, promissory note, interim CFO, debt, Mudrick Capital, capital, finance, interest rate, repayment, Getaround