SPACInsider contributor Matt Cianci this week compiled his three favorite potential SPAC targets producing new-age sustainable materials. We look at why they are compelling and why each could be a fit for a blank-check merger.
Early in the SPAC surge that began last summer, Fortress Value Acquisition Corp. announced its combination with rare earth miner MP Materials (NYSE:MP). It immediately became one of the deals in early in the surge that turned heads, although SPACs had targeted mining and other extractive industries before with mixed results.
Gold and silver-miner Hycroft (NASDAQ:HYMC) continues to trade below $10 after combining with Mudrick I in June and oil-and-gas driller Alta Mesa declared bankruptcy a year after its 2018 combination with Silver Run II.
But MP Materials was a deal the market loved – and still does, closing at $43.53 Thursday, having completed the transaction in November.
A big difference between these deals was the two less successful combinations involved the commodities that have powered our past and present but MP Materials was mining the stuff of the future. Its holds rights to some of the largest deposits outside of China for the rare materials critical for making wind turbines, electric vehicle (EV) batteries, robotics and other cutting-edge technologies.
For investors looking for a pure play to invest in the upstream of sustainable energy and high tech, there was suddenly a stock for them.
These rare earth deposits are by their very nature rare, but, much of the stuff of the future is being created, not extracted. As sustainability goals force companies to find the right stuff to make their products and packaging that don’t pollute, much more investment into the makers of advanced materials is needed and SPACs are already jumping in.
The market still digs Roth CH’s (NASDAQ:ROCH) November-announced deal to combine with sustainable plastics-maker PureCycle, with the SPAC closing at $24.60 Thursday. Three other SPACs have also been drawn in with Artius (NASDAQ:AACQ), Peridot (NYSE:PDAC) and the trend-setting Gores team (NASDAQ:GRSV) each announcing deals this month with manufacturers of recycled or carbon-negative materials.
Much of the debate around the environment has centered on the stuff that makes the packaging consumers ball up and throw away only to lie undegraded for generations. But, one of the largest polluting culprits is something that we humans actually want to last – concrete.
Eight billion tons of plastic have produced over the past 60 years, but the cement industry pumps out that weight every two years, and producing it creates 4% to 8% of the world’s carbon emissions. If the cement industry were a country, it would the third largest CO2 emitter in the world.
While there may be no way of putting the whole emissions genie back into the concrete bottle, CarbonCure has found a way of trapping what CO2 is left within the concrete that is made. It injects additives into wet concrete that mineralize CO2 into a solid that strengthens the material and keeps the CO2 within, even if that concrete is destroyed or demolished.
CarbonCure produces its own concrete this way and licenses the technology on a monthly basis to about 300 other producers. It estimates that every cubic yard of its concrete that is poured eliminates 25 lbs of CO2 that would otherwise be released into the atmosphere.
Thus far, the Canada-based company appears to have not tugged on the strings of outside capital much for its growth, raising a total of $12.4 million in publicly disclosed rounds since 2011.
But, CarbonCure has also raised the ante for itself with a target of reducing CO2 through concrete by 500 million tons annually by 2030. Its past two rounds in September and January did not disclose proceeds but included several new deep-pocketed investors such as Mitsubishi (TY:8058), Microsoft and Amazon’s Climate Pledge Fund.
It has also thus far primarily focused on the North American market, but a SPAC transaction could help facilitate a wider global launch and potentially a business model shift that brought more of the concrete-making under its roof rather than through licenses.
In a similar vein, agriculture generates 26% of the global greenhouse gas emissions, much of which comes from activities that are difficult to avoid. But, Calysta is among the companies mitigating the damage by crafting sustainable inputs for that industry.
It has jumped to the very beginning of our food chain to create a sustainable fish and livestock feed created entirely from fermenting natural gas with naturally-occurring bacteria.
Unlike CarbonCure, Calysta has long been active in the private capital markets, raising $129.2 million through nine rounds and includes strategic investors BP (NYSE:BP) and Cargill among its backers.
Last month, it announced a joint venture in China with Adisseo (SHA:600299) to build a feedstock plant in the Chongqing expected to be the first commercial-scale facility of its kind.
Among the benefits of Calysta’s technology is it requires no agricultural land and uses almost no water to produce its feed. Meanwhile, agriculture has claimed about 50% of total habitable land in the world and accounts for 70% of all freshwater use.
Those strains don’t show any sign of lessening and demand for animal-based food is expected to outpace that of broader food demand. It is estimated that producers will have to increase the output of meat and milk by 25% per hectare by 2050, and part of that comes from not using more land to feed the animals themselves.
While Calysta is likely on the radar of all 18 SPACs currently searching for targets in sustainability, it seems like a particularly good fit for Natural Order Acquisition Corporation, (NASDAQ:NOAC) which specifically seeking a target “disrupting the animal-based protein and food industry.”
Hazel replaces something that doesn’t get thought of much: those little sachets of silica gel that we are famously extorted not to eat. While silica gel absorbs moisture to prevent damage to consumer goods, Hazel has developed sachets that do something like the opposite for fresh produce.
Its sachets and packaging release vapor that helps form contained atmospheres that extend the life of produce by as much as three times. These vapors prevent mold and also slow the effects of the of ethylene, which is the hormone that fruits and vegetables release to ripen and then eventually spoil.
This is a big issue for food sustainability as over 30% of produce harvested is never consumed, instead turning to wastage on grocery store counters or in the supply chain along the way.
Much of the company’s early developmental work was funded by the USDA, but the company nonetheless did outside funding rounds in each year from 2017 to 2019. Its $13 million raise in 2019 was its last such move, however, and was intended to bridge the company to profitability.
Hazel’s products may start in the middle of the value chain, but they do end up on shelves and therefore could potentially attract the attention of the 12 SPACs searching in the consumer space. Given that it is a slightly earlier target, Hazel could also be a fit for Gladstone Acquisition Corporation (NASDAQ:GLEEU) which has filed for an $100 million IPO with the intent of combining with a target supporting the farming industry broadly.
Eric’s Top 3 SPAC Targets – Location-Based Tech
SPACInsider contributor Eric Weidemann this week compiled his three favorite potential SPAC targets among location-based services software and technology companies. We look at why they are compelling and why each could be a fit for a blank-check merger.
We are now well past our first generation of location-based service players like Uber gaining unicorn status and changing market-wide expectations. But, with the increase in connected devices and complexity of networks with 5G on the way there is no shortage of opportunities to expand these new models or introduce entirely new ones to the market.
SPACs have already wet their beaks in the latest generation of location-based technology players this year. Software II (NASDAQ:SAII) announced a combination with vehicle data analysis firm Otonomo February 1, Osprey (NYSE:SFTW) announced a deal with satellite-observation company Black Sky two weeks later and NavSight (NYSE:NSH) kicked off March with its announced merger with space-based data tracker Spire Global.
The first generation of big apps to use location relied primarily on Google Maps and Mapbox aims to take its place.
The San Francisco-based company was founded in 2010 and initially served governments and non-profits primarily. But, last month it took $150 million from SoftBank and named a new CEO with the goal of capturing market share among automakers’ built-in navigation systems. This funding round valued the company at over $1 billion and the company expects to generate over $100 million in revenue in 2021, according to Bloomberg.
Mapbox has already been contracted to develop BMW’s (DE:BMW) next generation in-car navigational suite. This work comes at a particularly valuable point as automakers begin integrating autonomous capabilities to vehicles and Mapbox aims to win contracts with about a dozen more automakers this year.
It won over BMW with the customizability of its map aesthetics and potential for unique vehicle integrations. Before its pivot to the dashboard, Mapbox’s largest clients included Instacart, Snapchat (NYSE:SNAP), the Weather Channel, and Facebook (NASDAQ:FB).
All of this puts Mapbox right at the confluence of many hot sectors – autotech, locational marketing and ecommerce delivery services. The company even launched a joint venture with Softbank in May to track and map the coronavirus spread in Japan, giving it some experience in digital health applications.
While Mapbox’s piece of the cars of future may be more familiar and somewhat less exciting than lidar, it has the potential to provide more recurring revenue than lidar as it is primarily a software rather than hardware product.
Mapbox could fit the focuses of a large number of SPACs, but three teams currently searching have specified automotive or mobility technology as their hunting ground – Live Oak Mobility (NYSE:LOKM), Atlantic Coastal (NASDAQ:ACAHU) and Kensington II (NYSE:KCAC.U). Two of these produced a pair of 2020’s most successful SPAC deals: Live Oak’s last target Danimer Scientific (NYSE:DNMR) closed yesterday at $37.75, while Kensington’s target Quantumscape entered the long weekend at $44.75.
DeepMap meanwhile is working to form the important connective tissue between a digital map and an autonomous vehicle by doing more intensive vehicle-guided mapping work to give cars a more detailed expectation of exact conditions.
The global demand for this level of HD maps for autonomous vehicles is expected to grow by a CAGR of 34.3% through 2028. These maps are also of critical value as autonomous vehicle technology companies attempt to scale because each has so far limited testing operations to closed areas of known roads.
For its part, DeepMap has racked up a bevy of awards in these efforts as one of Gartner’s top 5 autonomous vehicle system vendors in 2020 and one of Forbes Top 50 AI companies the same year. Part of what companies like DeepMap also do are to crowdsource regional differences in traffic rules, which are numerous.
Right turn on red, the “Pittsburgh left” and differing definitions of right-of-way are not systems a robot-car is likely to pick up or adapt to on its own. Even a cogent layout of street and highway lanes are not always available via models developed from aerial imaging.
For all of that promise the company has not yet raised mountains of outside cash for its development efforts. It has taken in just $92 million according to Crunchbase, gaining a valuation of $450 million in a 2018 raise according to TechCrunch.
But three years is a long time in the tech world. If DeepMap had paused its fundraising plans due to investor sentiment pre-2020, its connection with the autonomous vehicle world gives it a very different climate of options now.
While Mapbox tracks the exterior world and DeepMap traces its lanes, NextNav has concentrated on mapping the interiors of buildings for public safety and commercial applications.
First responders need more information than the outer contours of a building in order to conduct rescue missions. In 2019, the FCC required wireless carriers to be able to provide the vertical position of their devices so rescue workers can better determine where victims in distress might be.
NextNav is helping carriers meet this requirement and is already partnering with Motorola for such situations, claiming that 3D geolocation views of crisis locations reduces search times by over 85%. It has also licensed its technology to 3AM which produces wearable technology for first responders themselves and helps their squads to keep accurate locations on one another. Seventy percent of first responders have reported using inadequate maps and 80% of 911 callers today use their cell phones for such calls.
But, the capabilities of NextNav extends beyond public safety and into gaming. The company has partnered with Unity (NYSE:U) with a plug-in that will allow developers to build 3D gaming experiences both up and down while most AR experiences are limited to a horizontal plane. About 84% of the US population lives in urban, multi-story buildings and AR game developers have been seeking to find a way to better integrate those environments.
Crucially, NextNav has systems that do not require GPS, which is prone to failures in urban areas and few location-based services have backups to it.
Goldman Sachs (NYSE:GS) has invested in NextNav’s last two rounds, including at $120 million Series E in January 2020, and the company has raised about $278 million in outside funding overall. As a tech company initially launched in 2008, it likely has a fair amount of early investors ready for a liquidity event and its Goldman Sachs connections could easily link it up with the SPAC market.
New Providence Acquisition Corp. (NPA) Shareholders Approve AST & Science Deal
The parties expect to close the deal by about April 6, after which the combined company will operate as AST SpaceMobile with its shares and warrants trading on the Nasdaq under the symbols “ASTS” and “ASTSW”, respectively.
New Providence noted in its press release that AST expects to receive $462 million in proceeds after the vote, and while it did not share redemption figures, this number indicates they were minimal as this is the roughly sum of its PIPE and estimated trust value pre-redemptions
The two sides initially announced their $1.4 billion business combination on December 11. Midland, Texas-based AST is working to build the first space-based cellular broadband network to fill coverage gaps and eventually make 4G and 5G access universal.
- Barclays is acting as financial advisor and capital markets advisor to AST SpaceMobile.
- Barclays and Deutsche Bank Securities Inc. acted as placement agents to New Providence in connection with the PIPE offering.
- Deutsche Bank Securities Inc. and BTIG LLC are acting as financial and capital markets advisors to New Providence.
- Latham & Watkins LLP and Foley & Lardner LLP are acting as legal counsel to AST SpaceMobile.
- Kirkland & Ellis LLP is acting as legal counsel to New Providence.
Collective Growth Corporation (CGRO) Reports Preliminary Results of Completion Vote
Property Solutions (PSAC) & Faraday Future: Live Q&A – April 7th, 2:00PM
Live Management Presentation and Q&A
for an online investor presentation and live Q&A discussion regarding their proposed merger, featuring:
Faraday Future, Global CEO: Carsten Breitfeld
Faraday Future, CFO: Zvi Glasman
Faraday Future, Sr. VP of Product Execution: Bob Kruse
Property Solutions, Co-CEO: Aaron Feldman
Date: Wednesday, April 7th
Time: 2:00 p.m. (Eastern Time)
* Management will be taking questions from the audience *
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