The SPAC boom of 2020 is Wall Street’s story of the year and a once-in-a-lifetime chance for early-stage tech companies—particularly in the advanced transportation space—to grab funds at a breathtaking pace. And while some have listed shares years ahead of meaningful revenue generation or a clear outlook, billionaire tech investor Peter Thiel is excited about a broader transformation.
“There seems to be a lot of pretty crazy froth, and it’s gonna take years for some of these companies to grow into the valuations,” Thiel tells Forbes. “But I keep thinking the other side of it is that one should think of Covid and the crisis of this year as this giant watershed moment, where this is the first year of the 21st century. This is the year in which the new economy is actually replacing the old economy.”
Thiel is backing one of the higher-profile SPAC mergers, investing in laser lidar startup Luminar Technologies, which began trading on Nasdaq today under the ticker “LAZR.” Founded by optics prodigy Austin Russell (a Forbes 30 Under 30 alum), the Palo Alto, California-based sensor company’s deal is raising about $600 million in gross proceeds in its merger with Gores Metropoulos and turned its 25-year-old CEO into the youngest self-made billionaire in the world, based on Luminar’s estimated market cap of $3.4 billion prior to the start of trading.
“This is the year in which the new economy is actually replacing the old economy.”
Makers of cleaner cars and trucks and companies like Luminar that make technology to support autonomous transportation have been a primary beneficiary of SPAC money. They’re luring investors who may hope to replicate the outsize gains Tesla shareholders have reaped this year as Elon Musk’s EV powerhouse continues to push battery-powered cars into the mainstream. Like Tesla, which listed on Nasdaq via a traditional IPO in 2010, many of the new players also aren’t likely to be profitable for years.
Listing via a SPAC deal can be much faster than a conventional IPO. A startup merges with an existing special purpose acquisition company that functions as a blank-check shell corporation, whose sponsors have already paid the underwriting and legal costs of an initial public offering.
Truckmaker Nikola Inc., which is a few years away from delivering hydrogen-fueled big rigs, is a cautionary tale for new-generation clean vehicle companies. Its shares surged after a June listing via a SPAC merger and rose further in September when a tentative alliance with General Motors was announced. Things took a sharp downturn that month when an analyst accused Trevor Milton, Nikola’s founder and former executive chairman, of making fraudulent claims about its technology. GM also backed away from the planned equity tie-up on November 30, though may still sell Nikola hydrogen fuel cell technology and batteries for its trucks. Even with those problems, Nikola retains a $7 billion market cap and says it’s moving forward with plans to start building electric trucks next year.
A SPAC listing has aided auto designer Henrik Fisker, whose first electric vehicle company failed in 2013. His new venture, Fisker Inc., plans to begin selling stylish electric SUVs in 2022 and has lined up a production partnership with Magna to ensure that happens. Other beneficiaries of the SPAC boom include fast-moving U.K. electric vehicle maker Arrival, and startups including Hyliion, Canoo, Lordstown Motors and Lion Electric. Los Angeles-based battery maker Romeo Power, which is making lithium-ion packs for Nikola’s heavy-duty vehicles, has a SPAC deal of its own.
Along with Luminar, Velodyne, the longtime leader in automotive lidar, and Aeva, a lidar startup created by two former Apple engineers, also inked SPAC mergers to fund production and further development of their high-tech sensors.
A member of the “PayPal Mafia” that includes Musk, Reid Hoffman and Max Levchin, Thiel has had a lucrative career as a venture capitalist fueled by early bets on Facebook and more recently cofounding CIA-backed big data startup Palantir. As the Founders Fund partner and head of Thiel Capital sees it, a transformation of “old economy” industries to higher-tech versions has been delayed for two decades. “In some sense, it got aborted in March 2000, when the tech bubble burst in 1999, 2000.”
Demand and interest by other companies to find their own special purpose acquisition company deals show no sign of slowing, says Alec Gores, founder, CEO and chairman of The Gores Group. The Beverly Hills investment firm that helped take Luminar public has raised about $5 billion through SPAC mergers for companies this year and expects at least three additional such deals in 2021.
“We’ve probably got 100 inbound calls for these types of deals, anywhere from electric vehicles to autonomous driving. We sorted through those and ended up with Austin’s,” Gores says. “It’s great for everyone. For people that need capital to get their vision and their dreams, this has become a great vehicle to do that. And like anything else, there will be some great ones and some bad ones. Our job is to avoid accidents on our end.”
There’s a risk of “froth” around some of the new SPAC-backed companies, and the electric vehicle space in particular, if some don’t meet expectations, says Thiel.
“But I keep thinking that maybe this time the movie is going to have the alternate ending–which is somehow the tech is actually going to work, at least in the aggregate,” he says. “Some will fail, some won’t, but on the whole, the transformation of the 21st century is going to work.”