The Verge has reported that Bird, one of the leading e-scooter companies, overestimated it’s revenue for two years, throwing doubt on the already struggling company.
Financial statements from 2020 and 2021 were artificially high, because Bird counted the balance remaining in customers digital Wallet as revenue. Potential revenue is, of course, not revenue and so the finances of the company between those years cannot be relied on. The company said the following as this came to light:
“Management has concluded that the Company’s disclosure controls and procedures are not effective at a reasonable assurance level, due to a material weakness in its internal control over financial reporting related to the ineffective design of controls around its business systems that resulted in the recording of revenue for uncollected balances following the completion of certain Rides that should not have been recorded.”
This news comes at a time when the company is already on shaky ground. Roughly 25% of the company has been let go this year and the founder and CEO, Travis VanderZanden has been replaced, though he remains chair of the company.
Bird was an early mover in the e-scooter market. The market has grown quickly, especially in North American and Europe. As the market begins to mature there is greater regulation and a move toward standardization. There is also a transition from quick start-up behaviour toward trying to find sustainable business models. This transition, it would seem, has been tricky for Bird. A financial scandal won’t help the company make that transition.
It is not clear from the report what the extent of the misallocation was. Evidently the wallet balance was allocated as revenue for ‘some’ rides, but how many? Was this a purposeful move to strengthen financials to increase investment, or was an oversight due to insufficient procedures? Undoubtedly the truth will eventually come out.
If Bird is a phoenix, then it will rise again and be better for it, with better financial systems and a renewed trust of both customers and investors. It may not, of course. Cities, I think, should benefit regardless. After the flood of scooters left helter-skelter on our streets, we seem to be moving toward usable, helpful, and efficient micromobility solutions. The scandal, however, reminds us that even if you’ve got good tech or a product, good business practice remains essential.
Written by Joshua Bronson,
RISE Mobility & Systems