Freightos, a fast-growing ocean and air freight marketplace similar to Expedia in air travel, announced late Tuesday it is going public through a merger with Gersher Acquisition Company.
The company will be listed on the NASDAQ exchange under the ticker symbol FROS.
The Freightos SPAC will have a pro forma enterprise value of approximately $435 million and could generate up to $166 million, although realized cash could be a quarter of that amount depending on the extent of Gersher’s pre-merger redemptions. The deal is small by SPAC standards.
The Jerusalem-based freight technology startup also disclosed that its existing investors include Qatar Airways, the world’s largest cargo airline and FedEx (NYSE: FDX). The cargo division of International Airlines Group (British Airways, Iberia, Aer Lingus, Vueling, Level) and LATAM Airlines Group in South America are non-financial partners.
The board of directors will include FedEx Logistics CEO Udo Lange and Guillaume Halleux, the chief cargo officer of Qatar Airways. The Loadstar pulled back the curtain on Freightos’ investors last week with the disclosure of the Qatar Airways and FedEx interests.
The involvement of carriers in a neutral freight reservation site raises questions for some about conflicts of interest, but other logistics professionals say they aren’t concerned. Thousands of freight forwarders, for example, have participated for years in INTRAA, now part of E2Open, a multi-party booking site created by ocean carriers.
“Strict internal screens are in place to avoid directors associated with logistics companies being exposed to any data relating to their competitors,” the Freightos announcement said. The company previously disclosed non-industry investors but had not named the airlines.
Shawn Richard, vice president of global air freight at Seko Logistics, said Freightos should have publicly disclosed all its investors but added there likely won’t be “any long-term effects or brand damage.”
The Freightos booking platform typically connects shippers and freight forwarders, while freight forwarders make reservations with ocean and air carriers on sister site WebCargo. The systems also provide users extensive data about the status of their shipments. The company also publishes ocean and air indices of spot market freight rates.
Last week, WebCargo added a digital payment function allowing users to conduct an entire transaction without having to go to a third-party payment platform.
More than 30 airlines, many ocean carriers and dozens of trucking companies sell capacity on Freightos, which also counts 3,500 freight forwarders and 10,000 importers and exporters as part of its ecosystem. WebCargo facilitated more than 100,000 e-bookings in the first quarter, according to Freightos.
Investment rationale
SPACs, also referred to as “blank check” companies, are investment vehicles set up by a management team that files for an initial public offering and then seeks out a target company to acquire and negotiate a buyout. Shareholders are invested in the acquired company.
SPACS are a way for small, private companies to access public markets without going through a time-consuming and expensive IPO. Experts say SPACS are out of favor and that many startups that took that route end up needing to raise more money.
Proceeds will be used to accelerate Freightos’ technology development, geographic sales expansion and entrance into new market segments, including through acquisition. Airlines are able to provide real-time, dynamic price quotes and immediate booking, but ocean carriers are still building out application programing interfaces that will enable them to seamlessly connect to the Freightos system. CEO Zvi Schreiber founded the company a decade ago and said in a blog post on Tuesday that his team for years “ingested tens of thousands of Excel sheets with static carrier rates into a database and built sophisticated technology to automate routing and pricing” because carriers were resistant to change.
“Last year, $22 trillion worth of goods crossed borders, but we have all witnessed what happens when shipping doesn’t run smoothly, creating inventory shortages and increasing prices that challenge businesses and consumers globally. This presents a massive opportunity to digitize one of the last large offline industries,” he said in a news release about the deal. “Our combination with Gesher and access to public markets will allow Freightos to continue to aggressively scale our platform and lead as an international freight booking and payment tool of choice.”
The combined entity has also obtained $80 million in capital commitments from investors, including another $10 million raise from Qatar Airways and $60 million from M&G Investments, with more than $80 million expected to come from the IPO.
Pre-existing investors include SGX Group (Singapore Exchange Ltd.).
Freightos claimed a compound annual growth rate of 213% in valuation since the start of 2019 and more than 60% gross margins.
Freightos had $16.6 million in revenues in 2021 and is expecting $21.1 million in 2022. The 27% revenue growth in 2022 includes consolidated revenues from acquisitions the company completed, including 7L Freight, which closed this past January.
The company is currently projecting a cash burn of $21 million in 2022 and $24 million in 2023, according to a pitch deck filed with the SEC.
“Freightos is modernizing the global shipping industry as a true innovator in the logistics space,” said Gersher (NASDAQ: GIAC) CEO Ezra Gardner. “It enjoys positive unit economics, high gross margins, an incredibly high growth rate, and impressive customer retention. It is distinguished by its proprietary technology, data analytics, and deep network of customers comprising some of the largest players in the global supply chain today. Following the combination, Freightos will be the only pure-play public global freight platform investment opportunity available, and we’re excited to partner with Zvi and his team on this enormous market opportunity.”
Schreiber said the Gersher SPAC is more advantageous than a traditional IPO because it is backed by long-term investors.
“The clearest indication of the nature of this deal is the extended lock-up periods agreed by the SPAC sponsors, key new and existing investors, and the team, beyond those of a typical IPO or SPAC,” Schreiber wrote. “These key investors are not taking money out as part of this transaction. We are not exiting – we’re building. Our vision of digitalizing freight and improving world trade will take some years more, but going public will help to accelerate growth and attract new partners on our journey. This is an important milestone along our journey. It is not a destination.”
The transaction is expected to close in the second half of the year.
FreightWaves uses Freightos data in its SONAR platform, including the new Container Atlas that measures ocean spot rates, capacity and manifest data.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
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