Special Purpose Acquisition Company (SPAC) mergers had their heyday in 2020. But, during the first half of this year, they lost their luster and several have been exposed in a bad light.
SPAC’s are a quick and painless way for existing companies to go public, with less regulatory scrutiny than a traditional IPO. Some traders have found them to be a lucrative money-spinner, while many have lost a fortune.
Nevertheless, SPAC’s are here to stay, with many more declared each week. Vertical Aerospace, Thrasio, and Solid Power are three recent announcements.
Vertical Aerospace (NYSE: EVTL) will SPAC with Broadstone Acquisition Corp (NYSE: BSN)
Air Taxi company Vertical Aerospace is merging with SPAC Broadstone Acquisition Corp (NYSE: BSN) to go public later this year.
Vertical Aerospace will launch with the ticker symbol EVTL, with a projected combined company value of $2.2 billion. SPAC gross proceeds should reach $394 million.
Furthermore, Vertical Aerospace has already received investments from notable mainstream companies, including aircraft leasing company Avolon, Honeywell (NASDAQ: HON), and Rolls-Royce (LON: RR).
Ecommerce company Thrasio will SPAC with CCV
Fast-moving e-commerce company Thrasio has a fascinating story. It buys up-and-coming private-label businesses operating on Amazon (NASDAQ: AMZN) and scales them.
Thrasio is now planning to go public via a merger with Churchill Capital Corp V (NYSE: CCV).
Some of the brands Thrasio has under its wing are bike saddle business Bikeroo, skincare products from Sdara Skincare, Katchyindoor insect traps, and Vybe Percussion deep tissue massage guns.
100+ acquisitions since 2018 1,000+ employees around the world 🌏 $1.75 billion in funding
Carlos Cashman, Co-founder of @thrasio, reveals the playbook of scaling this iconic unicorn 🦄
🎙 the full bloom 1.17 :: https://t.co/hI1Ohnmjpf pic.twitter.com/U6Q7tcRImv
— bloom venture partners (@bloomvp_) April 15, 2021
Thrasio playbook
While Thrasio brands may at first bear an eery resemblance to WISH products (ContextLogic Inc (NASDAQ: WISH), there does seem to have been blood, sweat, and tears put into cultivating each brand before its Thrasio acquisition.
That’s because the entrepreneurs creating them are fuelled by passion and dreams of riches, with nothing to lose. Then, when the business becomes too big to handle, Thrasio swoops in with an offer the founder can’t refuse.
Interestingly, many Thrasio brand websites are powered by Shopify (NYSE: SHOP).
In February, Thrasio acquired $1.5 million in daily revenue and closed two to three new deals a week. It funded this with private funding rounds, raising $100 million in a Series C round with financing from Oaktree Capital (NYSE: OAK-A), Advent Technologies Holdings(NASDAQ: ADN), Peak6 Capital Management, and Western Technology Investment.
The combined company has a projected value of $2 billion.
Battery tech company Solid Power will SPAC with DCRC
Founded in 2011, Solid Power has gained some impressive investors along the way. Ford Motor Company (NYSE: F), Volta Energy Technologies, and BMW AG (ETR: BMW) have taken part in previous funding rounds, as have Samsung Electronics Co Ltd (KRX: 005930) and Hyundai Motor Co (KRX: 005380).
Today, Solid Power announced a $130 million Series B investment round led by @BMW, @Ford and @VoltaLink. Ford and BMW have also expanded partnerships w/ Solid Power to secure all solid-state batteries for future EVs. pic.twitter.com/VNQn2ZupjD
— Solid Power (@SolidPowerInc) May 3, 2021
Solid Power $130m Series B funding round
And now Solid Power is said to be planning a SPAC with Decarbonization Plus Acquisition Corp. III (NASDAQ: DCRC)
This deal is expected to raise around $100 million in new equity, leading to a combined company value of $1.2 billion (including debt).
Solid-state batteries have the potential to replace traditional lithium-ion batteries in electric vehicles and other electrification projects. It’s deemed a safer and cheaper alternative, with the enhanced capacity to power a more extended range.
Other companies operating in the solid-state battery space include Quantumscape Corp (NYSE: QS), Ilika (LON: IKA), Ionic Materials, and 24M Technologies.
But there are also a multitude of other battery technologies in development. These include sodium ion (saltwater batteries), molten antimony and molten magnesium separated by an electrolyte (liquid metal battery), silicon nanostructure (Amprius Technologies), zinc-air batteries (Eos Energy Enterprises (NASDAQ: EOSE)), magnesium ion (Pellion Technologies), rechargeable lithium sulfur battery technology (Sion Power).
Are SPAC’s a good investment?
When looking to get in on a SPAC, earlier appears to be better. SPAC investors like to follow a general rule of thumb when the share price is at or below $10 a share.
But this is not financial advice.
It’s crucial investors do their homework and look into the past and prospective financials of a company before buying shares.
In the early days, from target company announcement to the weeks after launch, SPACs are subject to extreme volatility and many investors buying in when the price is much higher have been burned.
For instance, alternative battery tech company Eos Energy Enterprises partnered with a SPAC called B. Riley Principal Merger Corp. II.(NYSE: BMRG) in November.
The EOS launch opened around the $10.50 share price, prior to that BMRG was trading around $10.
Since then, the Eos Energy share price reached a high of nearly $32 in January, only to slide back to $18 today. It’s seen considerable volatility along the way.
Investors buying into the SPAC before the merger should be aware of the risks. These deals have not yet been finalized and could be subject to change or cancellation.