Care.com Inc. (NYSE: CRCM) has received a $46.4 million investment from one of Alphabet Inc. (NASDAQ: GOOG)’s venture arms called Google Capital. This marks the first time Google Capital has invested in a publicly traded company. The development also turns Alphabet into the largest shareholder in CRCM, displacing Matrix Partners who previously held that crown.
But where does Care.com Inc. (NYSE: CRCM) plan to spend the $46.4 million windfall from Alphabet? The company has identified several areas it intends to invest the money. First, the company plans to repossess some of its shares currently owned by Matrix through a shares repurchase transaction.
CRCM’s CEO, Sheila Lirio Marcelo, said they intend to repurchase 3.7 million shares from Matrix in a deal that is expected to consume $30.5 million. Although that will wipe out the bulk of Alphabet’s investment, the move will also help preserve the value of the stock.
Before Alphabet came in, Matrix was the largest shareholder in CRCM, owning 15% stake in the company. Matrix has been an investor in the company since 2006. CRCM’s CEO Marcelo tried to allay concerns that perhaps Matrix was selling its shares because the future of the company is no longer rosy. According to the CEO, it is a natural evolution that early investors to sell a portion of their stake in the companies they have watched grow. As such, Matrix’s move isn’t strange.
Where will the rest of the money go?
After spending $30.5 million to buy back some shares from Matrix, Care.com Inc (NYSE:CRCM) hopes to spend the balance of the money on small acquisitions and other growth investments.
Alphabet gets board seat at Care.com Inc. (NYSE: CRCM)
Alphabet has earned itself a seat on the board of Care.com Inc (NYSE: CRCM) following the investment in the babysitting company. Laela Sturdy, who is a general partner at Google Capital, will seat on the board of CRCM. According to the company, having Google on board will give it access to hundreds of experts who can help it grow faster and become more profitable.
Alphabet’s Google Capital usually invests in more established companies while Google Venture focuses more on early-stage startups.
Care.com Inc. (NYSE:CRCM)’s revenue for 1Q2016 rose 23% YoY to $39 million and it posted EPS of $0.01, marking a significant improvement from EPS loss of $0.28 a year earlier.