According to a document seen by Bloomberg, the chief executive officer of Aurora Innovation Inc. recently outlined a variety of options for the self-driving business to address deteriorating market conditions and partners pushing back timelines, including a potential sale to Apple Inc. or Microsoft Corp.
In a memo titled “board discussion pre-read” and dated Aug. 3, Chris Urmson, who co-founded Aurora after managing Google’s self-driving car project, also discussed cost savings and floated options like taking the business private, spinning off or selling assets, and pursuing a small capital raise. The document reveals that Urmson accidentally sent this to staff on August 9 and requested that they not open it.
An Aurora spokesman acknowledged the memo’s veracity and stated that the business is thinking of strategies to maintain its competitiveness in a difficult industry.
A corporate spokesman wrote in an email on Friday, “Given the present macro conditions, every company should be going through the exercise of examining its choices and long-term strategy.” “We believe that considering issues like these is a good indication and a measure of good governance.”
Aurora has experienced difficulties since becoming public. Late last year, the company merged with a blank-check provider in a deal that left it with more than $1.8 billion in cash. While Aurora has reduced spending to extend its “runway” to the middle of 2024, Urmson, 46, wrote in a note that the company needed to take steps to survive the market slump and difficulties working with manufacturers he didn’t name.
Urmson added, referring to original equipment manufacturers, “despite our best efforts to help our OEM partners reach our original schedule, their timelines have slipped out.” Given the selection and awarding of major suppliers and the connection of key individuals to the projects, “We do have more confidence in their new timetables.”
The company’s shares, which have a market value of around $2.9 billion, increased by as much as 32% following the news. However, as a result of Aurora’s setbacks, the stock was down 81% this year as of Thursday’s close, reflecting the negative investor attitude. The corporation announced last month that it will postpone until 2024 the release of “scalable” driverless vehicle technology.
Acquisition for Cash?
Another tactical choice Urmson recommended in the document was to take into account buying businesses in the industry with $150 million to $300 million in cash and actively reduce expenses to strengthen Aurora’s balance sheet. He claimed that Allen & Co. had been researching this path.
Urmson provided a summary of personnel methods to take into consideration, including hiring freezes, staff layoffs, harsh management of underachievers, and more intense reorganization of the business to reduce duplication. He also listed cash-saving measures such as eliminating an equity grant for himself, zeroing-out corporate donations and discontinuing lunch-time food service.
Many electric-vehicle and self-driving startup companies that once acquired money readily through share offerings and mergers with special purpose acquisition companies have struggled in recent years as a result of poor execution and the downturn in the stock market. The Aurora document outlines the lengths to which a startup with a technology that is still under development is willing to go in order to obtain investment.
While the leadership of the company is “disinclined to sell at this moment,” according to Urmson, that could change with a competitive offer from a convincing strategic acquirer.
Given our present stock price, we ought to be a desirable target for any company wanting to secure a piece of the automated driving market, according to Urmson. Only a few companies—Apple, Microsoft, or even a Tier 1—could be seen as attractive landing spots, the speaker said.
Delayed Target
It’s been a difficult year for the Pittsburgh-based business. In order to build self-driving technologies and postpone its goal of having autonomous freight trucks on the road by a year to 2024, Aurora has spent around $230 million in cash.
For the next six months, Urmson stated, “we don’t think that a conventional fundraising opportunity of sufficient scope to add a year of runway to the company will present itself.” While we still have a lot of runway, it’s crucial that we make every effort to make it longer.
If Aurora can find a partner who would anchor a $1.5 billion investment round, one of its more significant potential options would be to take the business private, according to Urmson. He added that Aurora might be able to fetch $500 million to $1 billion for its lidar business.
The company doesn’t anticipate being able to renegotiate its cloud computing contract in the foreseeable future, which represents its second-largest spend after staff costs. The CEO advised the business to take into account a 10% yearly attrition rate that targets underperformers, which could result in the layoff of up to 150 workers in 2022.
To set the appropriate tone, Urmson might forego his non-cash award and save $2.4 million. Alternatively, the document stated that Aurora could stop providing food to staff and save $21 million.
In an effort to generate $25 million, the business also contemplated selling a facility or its test track, as well as providing employees with reduced shares.