Owlet Baby Care, the maker of connected infant-monitoring products targeted at consumers, today announced its plans to merge with Sandbridge Acquisition Corporation, a special purpose acquisition company (SPAC) backed by Sandbridge Capital and PIMCO private funds, and to begin trading on the NYSE.
The deal is expected to close during Q2 2021, subject to stockholder approval, and will deliver as much as $325 million to the combined company through cash ($230 million) and concurrent private placement (PIPE) of common stock ($130 million).
All told, the deal will leave Owlet at a total enterprise value of roughly 1.07 billion, according to the companies.
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Headlining the company’s brand is the Owlet Smart Sock, a connected wellness wearable that uses pulse oximetry to track a baby’s oxygen levels and heart rate during sleep. The company has combined this with the Owlet Cam, a WiFi-connected 1080p video camera baby monitor, and an app interface that parents can use to watch their child or to receive automatic alerts.
Owlet also sells an app-based healthy sleep program called Dream Lab, and is building up to the release of a pregnancy-band wearable for expecting mothers.
WHAT’S THE IMPACT?
As with all SPACs mergers, the news comes with an SEC filing that describes a company’s recent top line financials, future product strategy and an (often rosy) look at its potential business.
In their initial slide deck, Owlet is reporting a 2019 net revenue of $49.8 million with a 46% gross margin, and estimates that 2020’s numbers will land at $75.2 million and 47.5%, representing 51% year-over-year growth. Go a few year further down the timeline, and the company said that it is hoping to reach a net revenue of up to $1.06 billion by 2025.
However, the company noted that its limited operating history includes net losses, and that it currently relies on sales of the Smart Sock “for the majority of our revenue and expect to continue to do so for the foreseeable future.”
To hit those higher benchmarks, the company said that it plans to expand its brand by releasing new connected products, pursuing the budding landscape of telehealth reimbursement and launching outside of the U.S.
In particular, the company said that it is seeking FDA marketing authorizations for new products that would shift the company’s lineup beyond the wellness and into the realm of medical devices.
Those listed by the company include the BabySat, an infant pulse oximeter designed for telehealth and intended for use by babies with health conditions, and an over-the-counter version of the Smart Sock with expanded claims, so that it can be used for telehealth and can opportunistically screen for health conditions. The company is currently seeking FDA authorization for the BabySat, and plans to do so in the future for the OTC Sock as well.
This strategy will be fueled by the new funds brought in from the SPAC deal and PIPE, according to the investor slide deck. Additionally, it plans to invest in its connected nursery, software and services platform; acquisitions; customer acquisition; international expansion; and infrastructure upgrades over the course of two-to-three years.
THE LARGER TREND
Smart baby-monitors and connected baby-tech like Owlet’s have long held a place in the digital health landscape. Investors have backed products ranging from smart baby monitors and wearables to sleep coaching and smart baby bottles, while tech shows over the years have frequently highlighted baby tech tools built with consumers in mind.
Owlet is also the latest in a growing number of health technology or consumer-health companies to enter the public markets via SPAC mergers. Among those who’ve jumped onboard this bandwagon are Sharecare, Sema4, 23andME, Hims & Hers, Talkspace, Butterfly Network, UpHealth, Clover Health, Augmedix and SOC Telemed (with rumors circulating that Ro may be soon to follow as well).
ON THE RECORD
“We’re thrilled to partner with Sandbridge as we continue our goal of helping parents succeed in the parenting journey,” Kurt Workman, CEO and founder of Owlet, said in a statement.
“Ken Suslow and Domenico De Sole are category-defining modern brand creators, and will help usher Owlet into our next phase of growth as we expand our product suite and work to support family needs through some of the most crucial years of raising children. We look forward to further serving our current loyal customers as well as addressing a sizable untapped market, spanning multiple consumer touchpoints, and building Owlet into a vital family platform that will serve parents for generations to come.”