Another automotive SPAC to be launched

Luminar announced plans to list shares at an equity value above $3bn via a reverse merger with Gores Metropoulos, a special purpose acquisition company.

Spacs are the hottest fad on Wall Street and futuristic vehicles are their favourite target. Luminar is at least the sixth such company to have announced a reverse merger listing this year.

Yet Spacs are already known to be risky. The pitfalls are heightened when investors in blank-cheque vehicles are asked to make a bet on revenue and profits from an emerging technology.

Luminar specialises in “lidar” — light detection and ranging — designed to make self-driving vehicles possible. It is promising. The likes of Thiel and Volvo Cars Tech Fund say they want to be part of a group putting another $170m into the company. Luminar claims that by 2030, its revenue could hit $5bn and its operating profits could be about half that. Yet it does not anticipate selling more than 1,000 sensors until 2023. Growth depends on rapid adoption of autonomous vehicles — uncertain at best.

Still, shares in Gores Metropoulos rose to $11 yesterday, above the standard $10 price at which Spacs raise cash. Electric and autonomous vehicle start-ups waiting for Spac mergers to close include Hyliion, Lordstown Motors, Fisker, and Velodyne Lidar. All of these companies admit that broad commercialisation is years away. All four deals trade between $12 and $30.

Nikola, the electric truckmaker whose Spac deal closed in June, is the gold standard. It trades at nearly $40, implying a $15bn market cap. Nikola justified its valuation at the time that its Spac merger was announced by using predicted 2027 revenue of $10.6bn, discounted back seven years. That is about the same time it would take to acquire two college degrees.