Transfix Inks a SPAC Deal at a $1.1 Billion Valuation
G Squared Ascend I to Merge With Transfix
Transfix, a digital logistics startup, is going public via a SPAC deal. The transaction with blank-check company G Squared Ascend I (GSQD) values Transfix at $1.1 billion.
Once the deal is complete, Transfix will have $375 million in cash which it can use to take on rival Uber’s (UBER) Uber Freight service. Proceeds will go to expand and develop software and other transportation services. The deal also gives Transfix more firepower to pursue mergers and acquisitions if it decides to go that route, although the company has said it is committed to growing organically. Transfix investors will own 69% of the new company.
Digital Freight Brokerage Market Heating Up
Transfix is the latest deal in the freight brokerage market, which is going through big changes as new companies enter the space. Digital freight startups which have already experienced rapid growth now face pressure to become profitable. For this reason, freight startup Echo Global Logistics (ECHO) is going private in a $1.3 billion deal. The transaction is expected to give Echo the cash and flexibility it needs to build out its technology and platform.
Other companies in the space, including Uber Freight, are also expanding. In July, Uber Freight paid $2.25 billion for Transplace, a logistics services company. Transfix’s other competitors include Convoy, which is backed by Bill Gates and Jeff Bezos.
Profitability Eludes Transfix
Transfix was an early player in the digital freight market, bringing in revenue of $184 million last year. It projects that its revenue will hit $281 million this year. Still, profitability has eluded the company so far. It lost $27 million last year. Transfix expects losses to be $35 million in 2021, but it is targeting profitability in 2024. In comparison, Uber Freight had revenue of $348 million and an adjusted loss of $41 million in the second quarter.
Bringing more digital tools into logistics can streamline transportation and cut out middlemen. That bodes well for startups like Transfix which are disrupting the logistics market with their digital platforms. With competition heating up and investor interest still strong, it will be interesting to see what comes next in this burgeoning market.
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