Sonder Undergoes Class Action Investigation Postponing Financial Results Due to Errors in Prior Statements

Sonder, a company founded in Montréal and headquartered in San Francisco, specializes in leasing and managing short-term rental units.

However, in a recent development, Sonder has announced a delay in the release of its fourth-quarter and full-year 2023 financial results. This delay stems from the identification of accounting errors related to the valuation and impairment of operating lease right-of-use assets and related items for fiscal years 2022 and 2023. This revelation suggests potential discrepancies in how Sonder has assessed the value of its lease assets and raises questions about the accuracy of its financial reporting.

Sonder has outlined its intentions to rectify the situation by planning to refile its financial statements for both 2022 and 2023 as soon as possible. While the errors identified do not pertain to cash and are not expected to affect reported cash balances or cash flow statements during the specified periods, the company anticipates that correcting these errors will result in an increase in its overall net loss and loss per share for those years. The announcement of the delay in filing led to a significant decline in Sonder’s stock price, with shares falling nearly 20% from $4.55 USD at market open to $3.65 at the time of the announcement.

Following Sonder’s announcement, the law firm Johnson Fistel, LLP, disclosed its initiation of a class action investigation to determine whether Sonder, its executive officers, or other individuals breached securities laws by either misrepresenting or failing to promptly disclose material adverse information to investors.

Despite the delay in filing, Sonder did provide estimated and unaudited financial results for the fourth quarter and full year of 2023. According to these estimates, Sonder achieved approximately $164 million in revenue in the fourth quarter of 2023 and approximately $603 million for the full year, indicating a 30 percent increase in revenue compared to 2022.

In addition to the revenue figures, Sonder provided estimates of an operating cash flow shortfall of approximately $34 million in the fourth quarter and around $108 million for the entirety of 2023. These projections take into account the impact of restructuring, layoffs, and charges related to lease terminations. Sonder also disclosed that its occupancy rate remained at 82 percent for both the fourth quarter and the full year of 2023, with 12,200 live units at year-end.

Sonder, although now headquartered in San Francisco, has strong Canadian roots. Originally founded in Montréal in 2012 by Martin Pecard, Lucas Pellan, and Francis Davidson under the name Flatbook, the company later relocated its headquarters to San Francisco and was incorporated in the United States.

Throughout its history, Sonder has successfully secured significant funding rounds and notably went public through a special purpose acquisition company in 2022. Despite these milestones, the company has yet to achieve profitability and has shifted its focus towards attaining positive cash flow. This strategic shift has included workforce reductions, with Sonder cutting over 20 percent of its employees in 2022 and an additional 100 employees in the spring of 2023.

In September of last year, Sonder announced its intention to undergo a reverse stock split. This financial maneuver consolidates a firm’s outstanding shares into fewer, more valuable shares, while maintaining its overall market capitalization.