Sonder shares plummet after it retracts financial statements

Shares in Sonder Holdings plunged after the short-term rental company announced two years of its financial statements couldn’t be trusted.

The San Francisco-based competitor to Airbnb saw its stock price plummet Friday after it announced its financial statements for fiscal years 2022 and 2023 “should no longer be relied upon,” the San Francisco Business Times reported.

Sonder said it identified accounting errors related to the “valuation and impairment of operating lease right-of-use assets and related items” for the years 2022 and 2023, according to a press release.

The company expects the restated financials will increase Sonder’s overall net loss and losses per share over that time.

Sonder shares closed Thursday prior to the announcement at $5.90. At the close of the market Tuesday, the market valued them at $3.13 for a cumulative decline of 47 percent.

The company is delaying the announcement of results for its fourth quarter, which ended Dec. 31, 2023, and full-year financial results for 2023, originally expected late February or this month, and intends to file its restated financials “as soon as practicable.”

The announcement comes as a major blow for a business that has struggled to find its footing as a public company since its initial public offering in 2022.

Sonder underwent at least three rounds of layoffs — including 100 employees, or about 17 percent of its workforce, last month — and flirted with delisting for much of last year, eventually leading to a reverse stock split, according to the Business Journal.

Sonder now seeks waivers of noncompliance from its lenders to mitigate the potential impact of its financial misstatements. 

Those lenders could choose to terminate any existing agreements, increase their interest rates, accelerate debt obligations or initiate foreclosure proceedings on Sonder-owned properties that act as collateral, according to a Sonder regulatory filing.

“If our debt were to be accelerated, the company may not have sufficient cash or be able to borrow sufficient funds to refinance the debt or sell sufficient assets to repay the debt, which could immediately adversely affect our business,” Sonder said.

The company said Friday it had previously identified “material weaknesses” in internal controls over its financial reporting related to its leases, control activities and control environment. 

The company said it discovered as it was preparing for fourth quarter 2023 earnings statements errors in properly accounting for impairment indicators in some of its right-of-use leased assets, impacting what the company should record as the carrying value of those assets.

Sonder’s independent registered public accounting firm is Deloitte & Touche, according to the Business Times. Sonder announced in October it was appointing Adam Bowen as its chief accounting officer, whose responsibilities include financial reporting and controls.

“Any previously issued or filed reports, earnings releases, and investor presentations or other communications including or describing the affected financial statements and related financial information covering the non-reliance periods should no longer be relied upon,” Sonder said.

“Similarly, the report of the company’s independent registered public accounting firm accompanying the previously issued 2022 annual financial statements should no longer be relied upon,” the company added.

Sonder’s core business is managing apartment buildings and hotels on behalf of landlords through operating lease agreements, promising them greater reach to attract short-term guests through their global hospitality marketplace.

Though Sonder acts as a competitor with short-term rental giant Airbnb, it also works collaboratively with that company as one of the biggest landlords for Airbnb rentals.

— Dana Bartholomew

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