Inspirato (NASDAQ:ISPO), a subscription-based luxury travel company based in Colorado went public in March 2022, via a merger with special purpose acquisition company (SPAC) Thayer Ventures. When a private company goes public it marks the beginning of new opportunities, challenges, and growth prospects. So, what should investors now be aware of regarding this newly public company and ISPO stock?
One of the best resources for this new era for Inspirato is Brent Handler, founder and CEO of Inspirato. He has stated that:
We’re very happy that today we’re a public company because it gives us access to more capital, it gives us greater flexibility and it gives us a boost in doing M&A.
Handler is spot on in his insights. His goal of using the funds from the company going public to invest in new technologies to improve the communication and interaction with members of the company and grow the number of properties and vacation experiences offered to keep customers and attract new ones, shows his commitment to the success of Inspirato.
Just by going public, this travel subscription company can now have a whole new world of financing options to meet its long-term growth. For example, it can issue stock if it deems necessary. This is the cheapest way to raise cash. Or it can alter its capital structure by adding debt to take advantage of deducting the interest payments and lowering the total cost of financing. Simple put, Inspirato now has a lot of flexibility on how to invest its cash to achieve growth.
Regarding mergers and acquisitions activity (M&A), I consider more probable the scenario of Inspirato becoming a target of acquisition rather than itself acquiring other companies. As the result of the business combination on Feb. 11, after the closing of the transaction Inspirato had about $140 million of cash on its balance sheet. And today it has a market capitalization of $344 million with a stock price of about $7.30 a share. It is not that Inspirato cannot seek companies to acquire, but chances are better, due to its small-cap status, to become a target of another travel industry company.
The company’s fourth quarter and full-year 2021 results showed a record 2021 revenue of $235 million. This was a 42% increase compared to the previous year, and a record cash flow from operations of $29 million. That’s a major increase of 148% compared to the previous year as well.
These numbers are very positive but investors should be patient and wait to evaluate future earnings and growth, as the company generated positive free cash flow but is not profitable. It saw a wider net loss of -$22.2 million in 2021 versus -$540,00 in 2020.
Give ISPO stock some time to prove its worth and improve its profitability. As of now, it is not a buy, but keep an eye on it.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.