Ford-backed EV battery producer to go public via SPAC merger at a $1.2 billion valuation

Solid Power Inc batteries
  • Solid Power announced it is going public via a SPAC merger in a deal that would value the entities at $1.2 billion.
  • The company is expected to have $600 million in cash, including $165 million from private investors.
  • Ford Motors and BMW recently participated in the $135 million Series B funding of Solid Power in May.

Electric-vehicle battery producer Solid Power on Tuesday announced it’s going public by merging with blank-check firm Decarbonization Plus Acquisition Corporation III in a deal valued at $1.2 billion.

The company is expected to have approximately $600 million in cash, including $165 million from investors such as Koch Strategic Platforms, Riverstone Energy Limited, Neuberger Berman funds, and Van Eck Associates Corporation. The capital will be used to fund operations and growth.

Ford Motors and BMW recently participated in the $135 million Series B funding of Solid Power in May. The two companies also expanded partnerships with Solid Power to secure all solid-state batteries for future electric vehicles.

Solid Power produces rechargeable batteries for electric vehicles and mobile power markets. The company claims its production mirrors lithium-ion manufacturing processes while eliminating certain expensive and timely steps.

Upon closing of the transaction, which is expected to be completed in the fourth quarter of 2021, the combined company will trade under the Nasdaq ticker “SLDP.”

Solid Power is expected to have a nine-person board composed of a majority of independent directors and will continue to be led by Solid Power’s existing management team.

Other electric vehicle makers went public via SPAC this year such as Lucid Motors and Nikola Corp.

SPACs, shell companies seeking to merge with private companies with the intention of taking them public, have exploded in popularity in the last year.

In 2020, a total of 248 SPACs raised $83.3 billion according to SPAC Analytics. But in the sixth month of 2021 alone, data already show 340 SPACs that have raised $106 billion, comprising 61% of initial public offerings.

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Billionaire investor Chamath Palihapitiya files for 4 new biotech-focused SPACs that seek to raise $800 million

Chamath Palihapitiya, social+capital partnership, sv100 2015
Chamath Palihapitiya.

Chamath Palihapitiya filed for four blank-check companies on Wednesday along with a new partner, according to paperwork registered with the Securities and Exchange Commission.

The latest additions build on his roster of 6 special-purpose acquisition companies already raised, yielding more than $1 billion.

The four new SPACs are launched under a partnership between Palihapitiya’s venture firm Social Capital and hedge fund Suvretta Capital Management. One of Suvretta’s core investing strategies is to identify companies that are disruptive to the healthcare sector.

The companies may initially pursue a combination target in any industry as part of its proposed business strategy, filings state. Each SPAC is seeking to raise $200 million with ultimate specific focuses within the biotech industry: neurology, oncology, organs, and immunology.

They are each named Social Capital Suvretta Holdings Corp., distinguished by the Roman numerals I, II, III, and IV. The tech billionaire has said he plans to eventually do 26 SPAC deals, one for every letter of the alphabet.

Palihapitiya will serve as CEO and chairman, while Suvretta’s healthcare portfolio manager, Kishen Mehta, will serve as president.

“Our company unites scientists, physicians, entrepreneurs and biotechnology-oriented investors around a shared vision of identifying and investing in innovative and agile biotechnology companies,” the filing stated.

The SPACs, which carry the ticker symbols DNAA, DNAB, DNAC, and DNAD, are expected to trade on the Nasdaq.

Suvretta, founded in 2011 by former Soros fund manager Aaron Cowen, is dedicated to three investing strategies. One of these is its healthcare-focused unit Averill, set up in March 2020.

Palihapitiya first began making big money during his early days as an employee at Facebook, but became even more accomplished as a VC by backing companies like Box, SurveyMonkey, Yammer, and Slack. He has made a name for himself as the “SPAC King,” by kicking off mergers that took companies such as insurance startup Clover Health and Opendoor public.

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There were no new SPAC debuts last week for the first time since March 2020, as signs point to the end of the blank-check craze

Stock Market Bubble
A trader at the New York Stock Exchange.

  • The air may be coming out of the SPAC market, with last week marking the first week of 0 new debuts since March 2020, said Bespoke Investment Group.
  • The firm said 20 holdings in the SPAK ETF have lost roughly 50% or more since mid-February.
  • 308 SPACs have raised $99.7 billion so far this year, according to SPAC Analytics.
  • See more stories on Insider’s business page.

The boom in SPACs, or blank-check firms that merge with private companies to take them public, has collapsed with new issuances drying up, according to market research from Bespoke Investment Group.

There has been no issuance so far this week and none last week, marking the longest SPAC drought since last March.

SPACs have surged in popularity, in part as they allow private companies to bypass the traditional IPO process, which can be slower and more expensive, in favor of a quicker route to public markets. The method of going public has been popular with many pre-revenue startups.

Bespoke said since February, $23.4 billion in SPAC issuance has been priced, which is roughly the same as the volume for the last two weeks of February, and a “small fraction” of the $135 billion in the second half of last year through the end of February.

“Given the collapse in performance since late February, it’s no surprise the register has stopped ringing,” said Bespoke in a note published Tuesday.

The firm noted that 20 stocks in the Defiance Next Gen SPAC Derived ETF that broadly tracks the SPAC space have lost about 50% or more since mid-February. Many of these are electric-vehicle and clean-energy names.

“Collectively, these stocks have seen their market cap fall from over $135 billion down to just $55 billion,” said Bespoke.

Among the biggest decliners, shares of XL Fleet, a company that converts commercial vehicles like small trucks into electric vehicles, and Diginex, a Hong Kong-based digital financial services company, have each fallen by about 67%, while Lordstown Motors shares pulled back by 64%.

So far in 2021, 308 SPACs have raised $99.7 billion, comprising 76% of all IPOs, according to SPAC Analytics. In 2020, 248 SPACs raised $83.4 billion.

In a SPAC Analytics list of top-performing SPACS, Primoris, a construction and engineering services provider, has logged a return of 672%, and sports-betting company DraftKings has posted a return of 604%.

A number of high-profile investors such as billionaire Chamath Palihapitiya and hedge fund manager Bill Ackman have been active in the space, and SPACs have lured famous non-Wall Street figures including ex-baseball player Alex Rodriguez, tennis star Serena Williams, and ex-House Speaker Paul Ryan.

The Securities and Exchange Commission has reportedly launched an inquiry into the SPAC craze and a top regulator with the SEC recently warned about the jump in fundraising SPACs, according to a report by The Wall Street Journal.

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The SEC says it’s looking closely at the wild earnings projections attached to many SPAC offerings

FILE PHOTO: The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst
FILE PHOTO: The U.S. Securities and Exchange Commission logo adorns an office door

The US Securities and Exchange Commission issued a warning to blank-check companies presenting projections that only give an optimistic outlook of future growth. The agency added that it will “look carefully” at SPAC filings and disclosures as well as those of their private targets.

John Coates, the agency’s acting director for the corporation finance division, said on Thursday that a company would be on “shaky ground” if it only disclosed favorable projections and omitted “equally reliable but unfavorable projections.”

Special purpose acquisition companies or SPACs have been booming, enabling many pre-revenue startups to go public. SPACs are essentially shell companies seeking to merge with private companies with the intention of taking them public. SPACs are often considered a cheaper, faster alternative to a traditional IPO.

SPAC sponsors have also generally been allowed to more freely give projections of future growth than is allowed for companies going public via traditional IPO, which are not allowed to broadcast future sales or earnings.

Coates pointed to the Private Securities Litigation Reform Act safe harbor, a legal liability SPACs often refer to when making optimistic forward-looking statements.

“This…is the reason that sponsors, targets, and others involved in a de-SPAC feel comfortable presenting projections and other valuation material of a kind that is not commonly found in conventional IPO prospectuses,” he said, referring to the safe harbor.

This, he said, raises significant investor protection questions, and is why he is calling on the agency to treat SPAC deals with the same level of scrutiny as IPOs.

“Any simple claim about reduced liability exposure for SPAC participants is overstated at best, and potentially seriously misleading at worst,” Coates said. “Indeed, in some ways, liability risks for those involved are higher, not lower, than in conventional IPOs, due in particular to the potential conflicts of interest in the SPAC structure.”

Coates added that while projections are woven into the fabric of business combinations, they have to be fair. Forward-looking information, he said, can be “untested, speculative, misleading or even fraudulent, as reflected in the limitations on the PSLRA’s liability protections.” He floated the possibility of having guidance about how projections and related valuations should be presented.

SPACs have attracted a number of high-profile investors including famed fund manager Bill Ackman and billionaire Chamath Palihapitiya. Celebrities have also joined the bandwagon, with icons such as baseball star Alex Rodriguez and tennis legend Serena Williams backing recent SPAC offerings.

Regulators have recently turned their eye to the soaring market. On March 11, acting SEC Chair Allison Herren Lee said that SPAC returns don’t warrant the “hype” they’re getting.

Last year, a total of 248 SPACs raised $83.3 billion according to SPAC Analytics. But by the fourth month of 2021 alone, data already show 306 SPACs that raised $98.3 billion, comprising 79% of all public offerings.

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