The dangers of the SPAC speculation wave

After months of frenzied speculation, electric car maker and Tesla rival Lucid Motors finally announced the biggest merger with a special purpose acquisition company to date.

Led by former Tesla engineer Peter Rawlinson, Lucid Motors late Monday agreed to merge with Churchill Capital IV. The deal values the business at about $24 billion through the accompanying PIPE transaction that prices each share at $15 apiece. Investors through the PIPE included Saudi Arabia’s Public Investment Fund as well as BlackRock. 

And shares of the SPAC plunged on the news. Yes, it is common for traders to sell on the news of a deal to lock in those gains, but this sell-off was significant. Shares of Churchill Capital IV were still down 32% as of trading Tuesday morning. 

Here’s part of the reason why: As rumors of a potential merger swirled in recent months, ebullient traders hoping to ride the updraft for another Tesla-esque success story bid up shares of Churchill Capital IV to as much as $60 apiece. Which means the price of the PIPE can be dilutive to existing shareholders.

What’s more, the bottom line still remains to be seen: The company has yet to ship a product and actually has yet to set a date to begin delivery of its debut luxury electric vehicle (it had originally planned to begin deliveries in the second quarter, but pushed it back). Lucid projects that it will deliver 20,000 units in 2022 and book revenues of $2.2 billion for that year. Those numbers are then expected to rise to $5.5 billion and $9.9 billion in 2023 and 2024 respectively. 

And that’s the thing: It’s all projected. It certainly could soar as a company, but it could also fall short—but there’s simply no history in the company at the moment to help make that judgement. No doubt that is playing a role in the company’s price swings. But hey, bond yields are low, traditional stocks are the new bonds, and risk is the new flavor of the year. Even though the PIPE valued the business around $24 billion, the company’s valuation in public markets still remains lofty at about $51 billion.

That said, the deal also raises questions about what happens if that willingness to take on risk abates. The deal is expected to bring about $4.4 billion in cash to Lucid, but the company also expects to remain cash-flow negative until 2025.

WHY METAL CANS ARE SEXY: A blank check company backed by SPAC veterans over at The Gores Group announced plans Tuesday to take the business that helps make White Claw cans public via merger. Gores Holdings V said it would combine with Ardagh’s metal packaging business, giving it an $8.5 billion enterprise value. 

“Ardagh Metal Packaging is benefiting from long-term megatrends, including sustainability and changing consumer preferences,” Paul Coulson, CEO of Ardag, said in a statement. Ireland-based Ardagh will retain a roughly 80% stake in the business following the deal.

Customers have increasingly turned to drink options that use cans over plastic and glass bottles (seltzers over beers, for example), and are also now more conscious about sustainability. Proponents of aluminium cans say the material is far more recyclable than its alternatives. In fact, I wrote about how the trends propelled a 139-year-old business into becoming one of the hottest stocks of 2019.

And in a bizarre twist, the coronavirus also appears to have been a boon to the industry. Shying away from bars, consumers are eating and drinking more at home—resulting in a looming shortage in aluminum cans.

Lucinda Shen
Twitter: @shenlucinda
Email: [email protected]

VENTURE DEALS

- Plume, a Palo Alto, Calif.-based smart home service, raised $270 million in Series E funding from Insight Partners. It values the company at $1.4 billion.

- Zomato, an Indian food delivery company, raised $250 million in additional funding. Investors included Kora, Fidelity, and Tiger Global. Read more.

- Highspot, a Seattle, Wash.-based sales platform, raised $200 million in Series E funding. It values the firm at $2.3 billion. Tiger Global Management led the round and was joined by investors including Bain & Company, ICONIQ Growth, Madrona Venture Group, OpenView, Salesforce Ventures, Sapphire Ventures, and Shasta Ventures.

- Industrious, a New York-based coworking space operator, raised $200 million from CBRE. CBRE now holds a 35% stake in the business and is its largest shareholder.

- Pocket Outdoor Media, a Boulder, Colo.-based creator of active lifestyle content and experiences, raised $150 million in Series B  funding. Sequoia Heritage led the round and was joined by investors including JAZZ Ventures, Zone 5 Ventures, and NEXT Ventures.

- ScienceLogic, a Reston, Va.-based maker of A.I.-based solutions for hybrid cloud management, raised $105 million in Series E funding. Silver Lake Waterman led and was joined by investors including Goldman Sachs, Intel Capital and NewView Capital.

- Anuvia Plant Nutrients, a Winter Garden, Fla.-based maker of fertilizer products, raised $103 million in Series C funding. TPG ART, Pontifax Global Food, and Agriculture Technology Fund led the round and were joined by investors including Generate and Piva Capital.

- ABclonal Biotechnology, a Woburn, Mass.-based life science tools and services provider, raised $92.9 million in Series C funding. Sequoia Capital China and LYFE Capital led the round.

- Ageras Group, a Danish maker of accounting software for businesses, raised $73 million from Lugard Road Capital. Read more.

- Splice, a New York-based maker of software for music producers with A.I., raised $55 million in Series D funding. Goldman Sachs’ GS Growth led the round and was joined by investors including MUSIC, a joint venture between Matt Pincus and Liontree. Read more.

- Foxtrot Market, a Chicago-based corner store and café, raised $42 million in Series B funding. Almanac Insights and Monogram Capital Partners led the round.

- Electric, a New York-based provider of IT tech and support for small and medium-sized businesses, raised $40 million in Series C funding. Greenspring Associates led the round and was joined by investors including Bessemer Venture Partners, GGV Capital, 01 Advisors, Primary Venture Partners, Atreides Management, and Vintage Investment Partners.

- Atera, a Tel Aviv-based IT management company, raised $25 million. K1 Investment Management led the round.

- January AI, a Menlo Park, Calif.-based company for tracking glycemic response, raised $21 million in funding. Felicis Ventures led the round and was joined by investors including Fitbit and Modern Health.

- EquityBee, a Palo Alto, Calif.-based employees’ stock options funding solution, raised $20 million in Series A funding. Group 11 led the round and was joined by investors including Oren Zeev Ventures, Battery Ventures, and ICON Continuity Fund. 

- Heyday, a New York-based skincare focused company, raised $20 million in Series B funding. Level 5 Capital Partners led the round and was joined by investors including Lerer Hippeau and Fifth Wall Ventures.

- WiTricity, a Watertown, Mass.-based wireless charging solution maker, raised $18 million. Future Shape led the round.

- Rows.com, a Berlin-based spreadsheet for developing business tools, raised $16 million in Series B funding. Lakestar led the round and was joined by investors including Accel and Cherry Ventures.

- SoundCommerce, a Seattle, Wash.-based data platform, raised $15 million in Series A funding. Emergence Capital led the round and was joined by investors including Defy Partners and Voyager Capital. 

- Origin Wireless, a Greenbelt, Md.-based maker of Wifi sensing tech, raised $14 million. Investors included Verizon Ventures and Alarm.com. 

- Platform9, a Mountainview, Calif.-based provider for private and edge clouds, raised an additional $12.5 million in Series D funding. WRVI Capital led the round and was joined by investors including NGP Capital, Mubadala Ventures, Canvas Ventures, Menlo Ventures, and Redpoint Ventures.

- FundGuard, a Tel Aviv-based SaaS investment management and asset servicing enterprise platform, raised $12 million  in Series A funding. Team8 led the round and was joined by investors including Blumberg Capital and LionBird Ventures.

- Katana, a Tallinn, Estonia-based maker of a manufacturing enterprise resource planning platform, raised $11 million in Series A funding. Atomico led the round.

- StorageOS, a cloud native storage management company, raised $10 million in Series B funding. Downing Ventures led the round and was joined by investors including Bain Capital Ventures, Uncorrelated Ventures and MMC Ventures, and Chestnut Street Ventures.

- BlocPower, a Brooklyn, N.Y.-based climate tech startup, raised $8 million in Series A funding. American Family Insurance Institute for Corporate and Social Impact, AccelR8, and The Goldman Sachs Urban Investment Group led the round.

- HowGood, a New York-based sustainability database for the food and personal care industries, raised $6 million. Contour Venture Partners led the round and was joined by investors including FirstMark Capital, Danone Manifesto Ventures, and Trailhead Capital.

- Snack, a Canada-based video-focused dating app, raised $3.5 million in pre-seed funding. Kindred Ventures and Coelius Capital led the round and were joined by Golden Ventures, Garage Capital, Panache Ventures, and N49P Ventures.

- VenoStent, a Houston-based developer of polymers for vascular surgery, raised $2.3 million in seed funding. Creative Ventures led the round and was joined by investors including IAG Capital Partners, C3 Ventures, Olima Ventures, Texas Halo Fund, Cowtown Angels, and SP Investment Fund.

- Shield AI, a San Diego, Calif.-based defensetech company allowing unmanned systems to operate without GPS and communications, raised $90 million in a Series C funding that was a mix of equity and debt financing. Point72 Ventures led the round. 

PRIVATE EQUITY

- CapStone Holdings invested $10 million in Perrone Robotics, a Crozet, Va.-based developer of autonomous vehicle systems. 

- Ardian acquired a majority stake in Jakala, an Italian marketing tech firm. Financial terms weren't disclosed.

- Celvam Management bought back the Argyll Club, the London-based flexible-office business it used to own, from IWG, per Bloomberg. Argyll filed for bankruptcy last year. Read more.

- GTCR and Reverence Capital Partners agreed to acquire Wells Fargo Asset Management, which has $602 billion under management, for $2.1 billion. 

- IK Investment Partners and ICG agreed to invest in Formuesforvaltning, a Nordic wealth manager. Financial terms weren't disclosed.

- MPE Partners recapitalized MSHS Group, a Fort Lauderdale, Fla.-based maintenance, repair, and overhaul services provider for marine and power generation applications. Financial terms weren't disclosed.

- Partners Group acquired Resilient Infrastructure Group, a Portland, Ore.-based provider of water and wastewater solutions. Financial terms weren't disclosed.

- Redwire, backed by Ae Industrial Partners, acquired Deployable Space Systems, a Goleta, Calif.-based developer and provider of satellite mechanisms. Financial terms weren't disclosed.

- SPT Labtech, backed by Battery Ventures, acquired Apricot Designs and BioMicroLab, California-based developer and manufacturers of laboratory-automation solutions for the life sciences industry. Financial terms weren't disclosed.

- KKR acquired a majority stake fiber optic network of Telefónica Chile for an estimated $1 billion.

- NMI, backed by Francisco Partners and Great Hill Partners, acquired USAePay, a Los Angeles, Calif.-based payment solutions company. Financial terms weren't disclosed.

EXIT

- Kuehne + Nagel International (SIX: KNIN) agreed to acquire Apex International, an Asian freight company, for about $1.5 billion, per Bloomberg. MBK Partners is a seller. Read more.

- Ameos’ founder and Intermediate Capital Group will acquire the stake in Ameos, a Swiss clinic chain, held by Carlyle. Financial terms weren't disclosed.

- Investcorp acquired a majority stake in KSM Consulting, an Indianapolis, In.-based consulting firm specializing in data analytics, technology and digital transformation, from Renovus Capital Partners, which will continue to maintain a minority stake in KSMC. Financial terms weren't disclosed.

OTHER

- Allied Universal will takeover G4S (LON: GFS), a U.K.-based private security firm, for about $5.3 billion. Read more.

- Goodyear Tire & Rubber Co. Agreed to acquire Cooper Tire & Rubber Co., a Findlay, Oh.-based tire maker, for about $2.8 billion. 

- LVMH’s Moet Hennessy is buying a 50% stake in Armand de Brignac, rapper Jay-Z’s champagne brand. Financial terms weren't disclosed.

- Canva acquired Kaleido.ai, an Austrian startup with tools to remove backgrounds from photos and videos, and Smartmockups, a Czech Republic-based maker of tech for creating mockups for merchandise. Financial terms weren't disclosed. Read more.

- SoftBank is nearing a settlement with WeWork co-founder and former CEO Adam Neumann that could include a $500 million decrease in Neumann’s payout, per Reuters. Read more.

IPO

- Vine Energy, a Plano, Texas-based natural gas company, filed to raise $100 million. Blackstone backs the firm. Read more.

- Score Media and Gaming, a Canadian sports betting company, filed to raise $183 million. Read more.

- Roblox, the San Mateo, Calif.-based social gaming company, plans to go public via direct listing on March 10. Altos Ventures and Tiger Global back the firm. Read more.

- VSPN, a Chinese e-sports company backed by Tencent, is preparing for an IPO in the U.S. For as soon as this year, per Bloomberg. Read more.

SPAC

- Apex Clearing Holdings, a Dallas-based clearings and custody company, will go public via merger with Northern Star Investment II, a SPAC. A deal values the firm at $4.7 billion.

- Enovix, a Fremont, Calif.-based maker of lithium-ion batteries, will go public via merger with Rodgers Silicon Valley Acquisition, a SPAC. The deal values the firm at $1.1 billion.

- Gores Guggenheim, a blank-check firm backed by Alec Gores and Guggenheim Capital, filed to raise $750 million. Read more.

- Slam Corp., a SPAC led by A-Rod and Antara Capital, raised $500 million.

- M3-Brigade Acquisition II, a SPAC formed by turnaround dealmaker Mohsin Meghji, now plans to raise $400 million. Read more.

- Tio Tech A, a SPAC led in part by HelloFresh CEO Dominik Richter that is seeking a tech-related businesses in Europe, filed to raise $300 million. Read more.

- Aspirational Consumer Lifestyle II, a SPAC formed by executives of LVMH and L Catterton seeking lifestyle businesses, filed to raise $300 million. Read more.

- L Catterton Asia Acquisition, a SPAC from L Catterton seeking a target in consumer technology sectors in Asia, filed to raise $250 million. Read more.

F+FS

- Tikehau Capital, a France-based alternative asset management group, raised nearly $1.3 billion for its T2 Energy Transition investment strategy.

- Goldman Sachs acquired a minority stake in Arlington Capital Partners, a Washington D.C.-based middle market private equity firm.