Analysis

Why Are So Many SPAC Targets EV Companies?

Several companies that have announced they’re going public this year through a merger with a SPAC are indeed related to electric vehicle technology.

Perhaps the most notable EV-related blank-check target was one of the first startups to put SPACs on the map. Electric-truck maker Nikola Motor Co. went public through a SPAC merger in summer 2020, and was one of a few high-profile SPAC transactions that helped make blank-check company mergers en vogue (DraftKings and Virgin Galactic were the other two).

This year, a slew of electric vehicle companies have announced their intention to go public through a SPAC. Among them are electric-bus maker Proterra, charging station company EVgo, electric-truck startup Xos, and Lucid Motors.

One possible reason could be that out of the EV and high growth companies that are being targeted by SPACs, some of them do not produce revenue yet. The way that they’re able to go public through a SPAC is the SPAC process allows them to use revenue projections out into the future to entice investor demand. Whereas, if they do it through the IPO process, the SEC doesn’t allow that.

Some of the makers of the electric vehicles themselves have not actually brought a product to market yet. Nikola and Lucid, for example, don’t have an electric vehicle available for purchase. 

Electric vehicle companies are also in a capital-intensive business, so they need money to grow. Raising capital via a SPAC, rather than traditional venture capital financing, probably presents better terms in the market.

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