Serve Robotics Inc. (NASDAQ:SERV), known for its sidewalk robots that deliver food for Uber (NYSE:UBER) Eats in Los Angeles, is facing scrutiny following its acquisition of Vebu Inc., an automation incubator. The transaction, announced on November 7, 2024, has been criticized by some who believe it unfairly benefits insiders, especially considering Vebu's history of unsuccessful prototypes and its focus on a commercial robot for avocado processing rather than delivery.
Short-seller Bonitas, suggest that Serve's director, James Buckly Jordan, has a pattern of raising funds for robotics ventures that fail to gain commercial traction, with at least $150 million raised for around ten businesses that did not succeed. Notably, Jordan's Piestro, a pizza robot company, and Miso Robotics did not meet their revenue promises despite significant pre-order claims.
The acquisition has also raised questions about the relationship between Jordan and Chipotle (NYSE:CMG), a major investor and customer of Vebu. A former Vebu employee disclosed challenges in scaling the Autocado prototype with Chipotle, leading to a decline in revenue and only one store deployment since the partnership's announcement in July 2023. Furthermore, Jordan reportedly reduced his SERV holdings by 20% following the acquisition news.
Serve's CEO, Ali Kashani, had set ambitious targets for the deployment of 2,000 robots by the end of the calendar year 2025, with expected annual revenues of $60-80 million. However, as of the third quarter of 2024, Serve had only 59 daily robots in operation, which is less than 3% of its target. Industry experts doubt the company will meet its goals, and there is skepticism regarding Serve's revenue projections.
In addition, Serve's largest investor and delivery partner, Uber Eats, has been engaging with Serve's competitors for sidewalk robot deliveries, both in the U.S. and internationally. Competitors Avride and Coco Robotics, as well as other delivery platforms like DoorDash (NASDAQ:DASH) and GrubHub (NYSE:GRUB), have opted for alternative solutions, which are reportedly 90% less costly than Serve's robots.
Serve's partnership with Magna International (NYSE:MGA), once a significant source of revenue through software licensing, has also faltered. Serve provided Magna with $15 million in $0.01 warrants and paid $5.3 million in manufacturing costs, but the returns have been minimal, with revenues declining by over 95% as of the third quarter of 2024.
Given these challenges, the competition in last-mile delivery, and Serve's failure to attract commercial interest from third parties, Bonitas has taken a short position in Serve Robotics, anticipating that its stock will decline significantly.
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