SPACtacular! Autonomous Vehicle companies hit by wave of financial flimflammery

Starting in late 2019 there was a wave of companies funded via a Special Purpose Acquisition Company (SPAC). It was during the Crypto Winter, when a lot of speculative money needed to find another outlet. And interest rates were rock bottom, so money was cheap. But the main purpose of a SPAC is to funnel money into an organization that is too financially dubious to IPO the proper way. The entire premise of SPACs was to get large amounts of funding for companies that weren’t otherwise fundable. And like crypto, SPACs pay off handsomely, as long as you are in early on the pyramid scheme. Plus there was a ripple effect. So much money was involved that it greatly inflated adjacent acquisitions and old fashioned IPOs.

SPACs distorted many other fields besides Autonomous Vehicles. But since AVs were riding the hype wave in the early 2020s, the associated companies were of course riding the short-lived gravy train.

This article provides an explanation of SPACs, why they exist, who started it all, and how some investors became rich while other people lost billions and billions of dollars. Will explain SPACs affected AV companies in particular, but a lot of other companies as well. And of course will describe their downfall.

Just what is a SPAC??

In short, SPACs are like NFTs, a deceptive way of using hype to raise lots of money, but only until the truth gets out. A pump-and-dump, but on steroids. Just make surer you are at the top of the pyramid scheme.

A SPAC, or special purpose acquisition company, is another name for a “blank check company,” an entity with no commercial operations that completes an initial public offering (IPO). After becoming a public company, the SPAC then acquires, or usually merges with, an existing private company, taking it public.

In effect, the “special purpose” of a SPAC is to bring a private company to the public investment market via an IPO, but without the usual financial rigor required to protect investors. Although SPAC strategies can be complicated, they tend to take less time to complete than traditional IPO listings and can be cheaper. The advisory fees associated with going public via a SPAC tend to be much less than the fees charged for a traditional IPO, though they are still typically 20%.

In particular, SPACs are useful when a company has revenue but is losing significant amount of money. The secret sauce is that with SPACs the backers are allowed to make forward looking projections, unlike with standard IPOs where projections are considered to be too speculative. So the story becomes “We have revenue, indicating a valid business, and in two years we will revolutionize XXX, magically explode, greatly increase revenue, and become profitable.” In addition, SPACs get around the pesky IPO rules preventing naive retail investors from investing in dubious companies and losing their money. Since hype is the secret ingredient, SPACs often have celebrities involved in order to attract attention. Also, SPACs often are backed by people who are experts in using hype.

Here is an excellent description from a New Yorker article called The Pied Piper of SPACs on why SPACs get around the issues of standard IPOs:

At the heart of a SPAC is a tension over who ought to be allowed to tell financial stories to the public. Many types of investment companies—such as private-equity funds, which have yielded enormous riches in recent decades—are generally prohibited, by government regulation, from soliciting money from everyday investors who earn less than two hundred thousand dollars a year or whose net worth, excluding their home, is below a million dollars. Traditional I.P.O.s have other constrictions: firms that are going public cannot publish forecasts of anticipated profits until key documents have been filed with the S.E.C.; the law also encourages an I.P.O. “quiet period,” which can last for months, and during which executives are dissuaded from speaking in public about the future.

These rules were designed to protect unsophisticated investors from being exploited by hucksters, but many entrepreneurs and venture capitalists say that they have undermined American capitalism. Jeff Epstein, an operating partner at Bessemer Venture Partners, who runs a SPAC of his own, said, “We’ve just lived through one of the greatest wealth-accumulation periods in history, and a lot of the public has been blocked from participating.”

New Yorker – The Pied Piper of SPACs

SPACs had long been a backdoor path to an initial public offering that only a company that couldn’t do it the respectable way would pursue. In late 2019, a speculative frenzy ensued that attracted a wide variety of exciting yet dubious companies. It especially was prominent with a new crop of unlikely start-ups in capital-intensive industries such as electric cars, flying taxis, and of course robotaxis. Today though, many of those companies are gone, or are about to be.

As is often the case, regular investors and rank-and-file employees were the losers; hedge fund managers and investment bankers were the winners. Not for the last time, regulators are stepping in to quash snake-oil schemes they didn’t do enough to stop when it might have made a difference.

Note: when a company merges with a SPAC and goes public, it is technically called a “de-SPAC“. But since that term is rather clunky we will simply say that a company performed a “SPAC”.

The demise of SPACs

This can’t last.

Bloomberg 3/8/21

For anyone looking to evaporate a large pile of money, the past year has presented abundant options. Of those, one of the faster and more effective methods involved investing in tech companies going public via SPAC.

Chrunchbase 12/16/22

In 2021, nearly 200 companies completed SPAC deals, up more than threefold from the year before. These deals were worth close to $500 billion, a fivefold increase. At the end of 2023, Bloomberg counted 20 companies that had gone public via a SPAC but had gone bust shortly afterwards, showing that they were not viable at all.

But in 2023 SPACs went bust. The following is excellent description of what went wrong:

What happened to make all these SPACs go bust? Think of the SPAC debacle as the last gasp of the low-interest-rate era. When money was nearly free, Wall Streeters could compete with each other to conjure novel ways to raise and deploy capital. As rates rose, it became harder for cheap money to chase bad ideas, forcing companies to actually have profitable business models to attract financing. Last year, there were just 98 SPAC deals on Wall Street, about half the level in 2021.

Washington Post – Another Wall Street fad has imploded. Not before it claimed its victims

Rodriguez, the baseball-shortstop-turned-entrepreneur, recently told Bloomberg Television that his goal was to build “the Yankees of SPACs.”

Bloomberg 3/8/21 – ‘Hey, Hey, Money Maker’: Inside the $156 Billion SPAC Bubble

And what about the future?

While SPACs are mostly dead now, it is still important to understand what happened because in the future there will be other financial schemes. And while regulators are finally addressing some of the problems of SPACs, they didn’t do enough when it actually would have made a difference.

It is important to tell this story now because another crazy financing vehicle will come along soon. That immature or money-losing companies were able to raise big bucks so easily was as predictable as it was tragic for investors who got caught on the wrong side of the trade. It was no different from the “pre-revenue” companies that did traditional IPOs during the dot-com boom of the late 1990s. Everyone knew there’d be a bust. They just didn’t know when.

Just as predictably, the SEC recently promulgated new rules tightening listing requirements for SPACs, a good example of closing the barn door after the horses have fled. Among other measures, regulators will make it more difficult for SPACs to make rosy projections, a marketing ploy long denied traditional IPOs. 

Washington Post – Another Wall Street fad has imploded. Not before it claimed its victims

Recommended readings on SPACs

There is far too much info on SPACs to cover here. But there are some great articles that explain more of the details:

SPACs are dead. Long live the King of SPACs!

And of course there is the SPAC King: the notorious Chamath Palihapitiya. He didn’t invent SPACs, but he saw how they could be abused, especially since one can make all sorts of hokey financial projections. And abuse them he did!

At the time [2019], a SPAC was a relatively obscure tool. It had been invented in 1993, by David Miller, a lawyer, and his friend David Nussbaum, a banker, as an alternative to the traditional I.P.O., but the idea had not really caught on. Palihapitiya decided that, if he put his name and his energy behind SPACs, they could become more popular—a lot more.

As Palihapitiya saw it, a SPAC enabled anyone to invest in high-risk, high-reward companies. He branded his SPAC project as I.P.O. 2.0, and dubbed his first investment pool I.P.O.A. The implicit promise was that soon enough he’d get to I.P.O.Z.

New Yorker – The Pied Piper of SPACs

A key innovation by Palihapitiya was that, unlike with IPOs, with SPACs you can hype them using glowing forecasts, no matter how dubious that forecast might be. Just make stuff up. The era of the pump-and-dump was revolutionized.

In an interview posted on YouTube, Palihapitiya complained, “In a traditional I.P.O., you can’t show a forecast, and you can’t talk about the future of how you want to do things.” The host was wearing a shirt that read “Put your money where CHAMATH is.” On another occasion, Palihapitiya explained, “Because the SPAC is a merger of companies, you’re all of a sudden allowed to talk about the future.”

New Yorker – The Pied Piper of SPACs

Plus there was far more money to be made via SPACs, for people like Palihapitiya. And another benefit is that they are open to retail investors, which means there is a whole additional source to fleece of their money.

Though SPACs do open the door to non-élite investors, they have their own inequalities. Most notably, the sponsors are paid lavishly—much better than they would be compensated in a traditional I.P.O. Sponsors often receive twenty per cent of a SPAC’s stock, simply for bringing it into existence. Such paydays can be worth hundreds of millions of dollars.

New Yorker – The Pied Piper of SPACs

The New York Times explained that Palihapitiya made $750 million even though his SPAC’s plummeted by 90%:

In recent months, some of the stocks of Mr. Palihapitiya’s SPACs have dropped nearly 90 percent from when they listed. By selling most of his shares early, he roughly doubled the $750 million he put in, mostly into the entities he backed. But many small investors who followed his advice may not fare so well.

New York Times – The ‘SPAC King’ Is Over It

How are Palihapitiya‘s SPACs doing now?

It is useful to see just how badly Palihapitiya’s SPACs performed. From a 5/5/23 Yahoo article titled Chamath Palihapitiya’s Crumbling SPAC Empire: Where His Top 5 Deals Are Today it is clear that they were all remarkable money losers.

All Palihapitiya’s SPACs had a ticker symbol of “IPO” followed by a letter. There was an IPOA, an IPOB, etc.

Virgin Galactic Holdings (NYSE:SPCE) was originally IPOA. Since its first trade in 2019, the space plane company stock is down 70%, opening May 2 at about $3.50/share. A sister company, Virgin Orbit, has collapsed, and Galactic is still conducting pre-revenue tests.  Virgin Galactic was doing horribly at the time. And their other source of money, from Saudi Arabia, was suddenly problematic due to the publicity of the government assassinating a prominent journalist, Jamal Khashoggi. But within all those problems, Palihapitiya saw potential $$$. See all the gory details of the Virgin Galactic SPAC below.

OpenDoor Technologies (NASDAQ:OPEN) was originally IPOB.  It was formed as an online real estate marketplace. Since its first trade in late 2020 it’s down 94%, after a failed effort at flipping the houses it was listing. It recently cut 22% of its workforce and opened May 2 at $1.39/share.

Clover Health (NASDAQ:CLOV) was originally IPOC. The company, which offers Medicare Advantage plans, is down 95% since it came public in early 2021. Its last trade was at 75 cents per share. While I have praised Clover Assistant, its tablet-based telehealth service, I called it dead money a year ago. The company has not been profitable, and recently laid off 10% of its workers. 

Social Capital Hedosophia IV (NASDAQ:IPOD) never found a merger partner and Chamath gave up on it last September. The same fate came to Social Capital Hedosophia VI (NASDAQ:IPOF) and the rest of Chamath’s alphabet soup.

Metromile (NASDAQ:MILE) was a super deal for Palihapitiya. He didn’t even have to create the SPAC himself. The SPAC was created by Cohen & Co. Palihapitiya merely led the PIPE deal. In case you are wondering, a PIPE deal is where a select group of private investors buying a publicly-traded stock at a price below the current price available to the public. This means that the special investors like Palihapitiya don’t have to do any of the work of the SPAC, except to hype it, yet they get a great deal on the SPAC stock. Remarkable financial engineering. At the time the Metromile SPAC went public, in February 2021, it was worth $1.3 billion. After the IPO the stock further increased in value. But then, after the hype bubble, the stock dropped by 95% and the company was valued at just $137 million. In July 2022, just 18 months after the IPO, Metromile was sold in a firesale to Lemonade (yes, that name is ironically appropriate for a SPAC that went totally wrong). Of course Palihapitiya and the others in the sweet PIPE deal did just fine.

Best for Palihapitiya SPAC (only down 70%)

SoFi Technologies (NASDAQ:SOFI) was originally IPOE. Since coming public in June 2021, it’s down 70%.

However, this may be the most successful of Chamath’s SPACs. It has a valid business model, as an online banking and brokerage platform. I have personally pounded the table for the stock, even bought some. But CEO Anthony Noto now agrees that consumers are seeking “safer, more well trusted” banks.

SoFi and the SPAC boom have a similar history. Both were caught offsides when the cost of capital surged. When interest rates were near zero, equity capital was easy to raise, and growth was in fashion. With interest rates at 5%, there’s now competition for capital, and investors demand that companies provide profitability alongside growth.

SoFi’s low costs, its ability to automate the work of other banks through its Galileo and Technisys units, and its purchase of mortgage servicer Wyndham, all make sense. But the payoff on this strategy is years away, if it comes at all.

He hyped the stocks, he sold his shares, and he made a profit while the retail investors who trusted him lost money.

Slate 8/24/23

And what about the individuals who lost money?

Palihapitiya is clearly over it. He made his money. The people who listened to him lost theirs. Remarkably though, he even went on Twitter to harangue those who got fleeced.

Recommended reading on Palihapitiya

There is far too much info about Palihapitiya to include here. I highly recommend you read the following to be further repulsed:

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The houses that SPACs built

So much money was generated by SPACs that there is an Crunchbase article from November 2022 called A Look Back At The SPAC-Fueled LA Mansion-Buying Spree Of 2021-22. Clearly the SPACs were great for the CEOs, at least for a while. Check out some of these nice homes that were bought for their stocks crashed:

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Autonomous Vehicle SPACs

Autonomous Vehicle companies are capital intensive, speculative, and hype driven. Perfect for SPACs! In fact, there is a dated but useful article in the EE Times from 07/23/2021 called SPAC Fever: Autonomous Vehicles.

Note that seven of the companies were focused on providing the same competing technology: LiDAR. Between 65 to 70 companies with active lidar programs existed in 2018, according to industry estimates. Obviously at least the vast majority of them would fail.

SPACs allowed these dubious companies to burn quite bright, at least for a while. And they indirectly helped the important non-SPAC companies like Waymo and Cruise justify shoveling large amounts of money into an incinerator. Without them the field would not be nearly as well developed.

We will look at what happened to all of these companies, and more, over the last few years. The goal is to show both that SPACs helped fuel the robotaxi hype bubble and that bubble has now burst.

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Aeva Technologies

From the article SPAC Fever: Autonomous Vehicles in July 2021:

Aeva is a lidar startup founded 2017 with a focus on Frequency Modulated Continuous Wave (FMCW) lidar. The lidar specs are quite strong. Aeva received VC funding of $48 million before SPAC started. Aeva’s partners include Denso, TuSimple, VW, ZF and one unnamed OEM.

Aeva announced a SPAC merger with the InterPrivate Acquisition Corp. on November 2, 2020. The merger was completed on March 15, 2021. Aeva raised an impressive $560 million from the SPAC and PIPE funding.

SPAC Fever: Autonomous Vehicles

For their SPAC merger in March 2021 they were valued at $2.1 billion.

And since the hype bubble…

As with many SPACs, the value of the company has plummeted 95% from its peak. And this is after it double in the last six months. They are doing a 1-for-5 reverse stock split on March 19th, 2024 because their stock has gotten so low. Market cap is now just $260 million.

Their financials show they are in deep trouble:

• Revenue of $4.3 million for full year 2023, compared to revenue of $4.2 million for full year 2022.
• GAAP operating loss of $147.8 million for full year 2023, compared to GAAP operating loss of $152.0 million for full year 2022.
• Cash, cash equivalents and marketable securities of $221.0 million and undrawn facility of $125.0 million as of December 31, 2023.

The short story is flat, almost non-existent revenue, with a burn of $150 million/yr but only $220 million available. No apparent prospects for turning things around. Have to expect that they will burn through their cash for one more year and then be acquired in a fire sale.

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Aurora Innovation

From the article SPAC Fever: Autonomous Vehicles in July 2021:

Aurora Innovation is a leading developer of AV software platforms. Aurora is active in multiple AV use-cases including robotaxis, autonomous trucks and goods AVs. It acquired Uber’s AV group which is covered here: Breaking down Aurora-Uber ATG Deal | EE Times. Since its founding in 2017, Aurora has raised $1.22B in venture capital.

Aurora has agreed to go public via a merger with Reinvent Technology Partners Y, a SPAC led by LinkedIn co-founder Reid Hoffman and Zynga founder Mark Pincus. The implied valuation of the merger is $13 billion, and Aurora is expected to raise $2 billion from the deal.

This is likely to be an important SPAC event for the AV industry. It is important that this SPAC is successful for the future of AV SPACs.

SPAC Fever: Autonomous Vehicles

Aurora is headquartered in Pittsburgh. Chris Urmson, who used to be CTO of the Google autonomous vehicle project, is the CEO and co-founder. After the IPO Urmson owned stock temporarily worth over $1 billion.

And after the hype bubble…

They are now focusing solely on autonomous trucking. They have use their own LiDAR system. They have 1,800 employees, though have had some recent layoffs.

In August of 2022 they were already considering selling the company due to only having enough cash to last to end of 2024 even after making cost reductions.

Even though they raised quite a bit of money as part of their SPAC merger, they became desperate for more. In July 2023 they announced plans for an additional $600 million private placement and a $200 million offering of common stock. This caused their stock to fall 10% in a single day.

In November 2022 they reported $1.2 billion in cash and short-term investments but that had dropped to $785 million of cash by end of June 2023. Their cash burn was approximately $180 million/quarter. For end of 2023 they reported $1.2 billion in cash again.

They appear to still be what is euphemistically called “pre-revenue”:

Their latest financial shareholders letter states that they expect to be ready for commercialization at end of 2024.

Aurora reiterated its financial position in its third-quarter 2023 earnings report and said it expects its total liquidity of $1.5 billion to support its planned commercial launch and fund operations into the second half of 2025. Unfortunately, second half of 2025 means less than one year of commercialization, meaning revenue will still be virtually non-existent.

Their stock has dropped significantly since their IPO but they remain the most well funded AV truck company. But given their burn rate, difficult safety issues, and even expecting revenue in 2024 we have to expect that they will only be around until sometime in 2026.

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AEye

Yet another LiDAR company, based in Dublin, California. From the article SPAC Fever: Autonomous Vehicles in July 2021:

AEye is a leading lidar company with added camera data. AEye was founded in 2013 and has raised $89 million in VC funding. On February 17, 2021, AEye will merge with CF Finance Acquisition Corp. III in a deal that values the company at $2 billion. AEye is projected to raise $455 million when the deal closes. The SPAC investors include GM Ventures, Subaru-SBI, Intel Capital, Hella Ventures and others.

SPAC Fever: Autonomous Vehicles

And after the hype bubble…

The short of it is that after their IPO their market cap dropped from $2 billion to $7 million. They had to do a reverse 1-for-30 stock split in December 2023, a definite sign of deep trouble.

For 2022 they had revenue of $3.6 million and a loss of $99 million, and just $94 million in cash. They will provide updated financial results for 2023 on March 26, 2024.

A true zombie startup, with no possibility of success. Rather shocked that they haven’t already declared bankruptcy. Surely they are trying to sell the company. They certainly won’t last to the end of 2024.

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Embark Trucks

Another autonomous truck and LiDAR sensor company. Based in San Francisco. From the article SPAC Fever: Autonomous Vehicles in July 2021:

Embark is developing an AV software platform for autonomous trucks. Embark is planning to use a SaaS business model where it charges a fee per mile driven for AV software and hardware. It was founded in 2016 and has $117 million in VC funding. On June 23, 2021, Embark and a public SPAC, Northern Genesis 2, announced a merger that value the combined company at $5.16 billion and will raise $614 million when the merger closes.

SPAC Fever: Autonomous Vehicles

The start of Embark was clearly quite exciting. After being part of YCombinator class of 2016, Alex Rodrigues and Brandon Moak received Thiel Fellowships, which is notorious for requiring recipients to drop out of college in order to start their world changing business. After all, getting rich can’t wait (at least for Peter Thiel). And Rodrigues became the youngest CEO of a publicly traded company, ever. What could possibly go wrong?

In June 2021 they announced former Transportation Secretary Elaine Chao was joining its board of directors. This certainly shows how even wealthy insiders wanted to be part of Embark.

They partnered with Luminar for LiDAR sensors, which happened to be another autonomous vehicle SPAC that got its start through YCombinator and Thiel Fellowship.

In November 2021 Embark went public via a SPAC.

And after the hype bubble…

Like many so-called SPACs that joined the public markets before they were mature enough, Embark struggled to develop and commercialize its autonomous vehicle technology.

TechCrunch

Embark quickly went from $5 billion valuation in November of 2021 to $90 million in March 2023, a span of just 16 months. At that time they also laid off 70% of their workers and closed two offices. They also were already exploring selling their assets and only had about $190 in cash left. The company was already clearly in big trouble. I imagine that Rodriguez was the youngest CEO ever to lose $5 billion in valuation, but an article was never written to verify that accomplishment.

In May 2023 it was announced that the remains of Embark were sold to Applied Intuition for $71 million.

Maybe next time YCombinator and the Thiel Foundation shouldn’t use youthful inexperience as part of their hype bubble.

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Innoviz Technologies

Yet another LiDAR company, this one from Israel. From the article SPAC Fever: Autonomous Vehicles in July 2021:

Innoviz is another lidar startup that was founded in 2016 in Israel. It received over $250 million from VCs before the SPAC started. Investors include Aptiv, Magna, Samsung and SoftBank. Partners include BMW and three Tier 1s—Aptiv, Harman and Magna.

Innoviz completed a SPAC merger with the Collective Growth Corporation and began trade on NASDAQ on April 6, 2021. The SPAC merger provided Innoviz with $380 million in additional capital.

SPAC Fever: Autonomous Vehicles

And after the hype bubble…

In August 2022 they announced partnership with Volkswagen to supply LiDAR for their self-driving cars. While this was temporarily exciting, Volkswagen has since pulled out of self-driving car development, rendering this partnership moot. Somehow Innoviz claimed that Volkswagen had put in an order for $4+ billion, but then just stopped talking about the deal.

Innoviz partnered with BMW to supply optional LiDAR for BMW 7 series passenger cars, though no information on actual sales numbers has been made public.

Their most recent revenue forecast from June 2023 is certainly a hockey stock straight out of SPAC mania. Their revenue for first half of 2023 was only $1 – 2 million/quarter.

And just after their optimistic revenue forecast they demonstrated exactly why they were publishing such information. In July 2023 they did a capital raise $65 million by selling stock, so they needed some excitement. The raise was at a low share price, which caused the stock to drop 25%. Existing investors suffered quite a bit, resulting in a negative article in October called Innoviz: Recovering From Devastating Capital Raise.

It is also noteworthy that Innoviz reported at the same time an order book (potential orders) of $6.9 billion, which should have generated a excitement and a higher stock price, if it was realistic. Their disappointing capital raise showed that investors simply did not believe that the order book numbers were accurate. The continued slide in their stock shows that their numbers indeed were exaggerated.

On February 28th 2024 Innoviz announced revenue for Q4 2023 took a massive jump to $14.9 million. They also announced $150 million in cash and cash equivalents and a quarterly burn rate of $14.5 million. While these numbers sound quite impressive, it appears they were largely due to items such as NRE (Non-Reoccuring Engineering) as opposed to actual sensor sales. Their stock continued its downward slide since financials were reported on February 28th:

In January 2024 Innoviz announced a realignment and layoffs of 13% in order to extend their runway. Market cap is now just $220 million, down from a pre-merger value of $1.4 billion.

Biggest takeaway on Innoviz is that they greatly exaggerate. This was true as part of their SPAC merger and certainly of their capital raise in June 2022. And they have not announced new deals beyond BMW in quite a while. Plus the jump in their Q4 2023 results seems to be considered by the stock market to be an exaggeration. They still have a good amount of cash so one can expect Innoviz to be around for 2-3 more years before their hype completely catches up with them.

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Luminar

Luminar Technologies is another company that makes LiDAR sensors and associated software for autonomous driving. Remarkably, the founder and CEO of Luminar, Austin Russell, was only 17-years-old and in high school when the company was founded in 2012.

Russell dropped out of Stanford (ala Elizabeth Holmes of Theranos) after just 3 months and worked on the company as part of a $100k Thiel Fellowship, the same way that Embark Trucks was started. It must be noted that a Thiel Fellowship actually requires the applicant to drop out of college since Thiel himself is in such a hurry to make some money, plus Stanford dropouts are great for generating hype. But of course the first 5 years of Luminar were in stealth mode so missing out on a Stanford education was for naught.

From the article SPAC Fever: Autonomous Vehicles in July 2021:

Luminar is a leading lidar company that was founded in 2012. It received over $250 million in VC funding before its SPAC—including investments from Volvo Car and Daimler Trucks.

On August 24, 2020, Luminar announced it was merging with a SPAC, Gores Metropoulos. At that time a post-deal market valuation of $3.4 billion was projected. The merger was completed on December 3, 2020 and Luminar raised $420 million. Luminar’s lidar revenue was $14 million in 2020—up 11% from 2019.

SPAC Fever: Autonomous Vehicles

Thiel was enthusiastic enough in the SPAC to invest millions more.

After the SPAC merger, the market cap of Luminar shot up to $10 billion in February 2021. Russell became, at 25 years old, the youngest self-made billionaire ever. He soon after also became the youngest person to lose over $1 billion of their own money, but for some reason there were no articles in Forbes about that accomplishment.

And after the hype bubble…

The idea behind Luminar, as it was for other LiDAR companies, was to profit from the bright future of autonomous vehicles, which need very expensive LiDAR sensors to effectively map out the road in real time. But to compete the cost of the sensors would be driven down to $500 – $1000. Somehow they did not foresee how this relentless competition would greatly drive down potential revenue, especially as autonomous vehicles sputtered in 2023.

Apparently making ungodly amounts of money from the stock wasn’t enough for the Luminar execs. In 2021, the year of the SPAC merger, the compensation for the execs was reported to be $31m for Eichenholz the CTO, $30m for Prescott the Chief Legal Office, $8.5m for Fennimore the CFO, and $4m for Faris the Former Chief Business Officer. In 2021 Russel, the CEO, received only $1, which of course seemed reasonable for someone who was just made a billionaire. But no need to fear. In 2022 Russell received $94m in compensation!

Austin Russell, founder and CEO of Luminar, is perhaps the most proliferate binger of the SPAC set. The stock of Luminar shot up to $10 billion, and Russell owned approximately one-third of it, according to a securities filing for the SPAC merger deal.

Forbes (almost) purchase

In May 2023, Russell entered into negotiations to acquire an 82% stake in Forbes , valuing the company at $800 million. It was even described as a “done deal“. Ironically, it was Forbes who broke the story in October 2023 that a Cruise robotaxi dragged a pedestrian by 20′, seriously injuring them. The story put an end to the hopes of Cruise rapidly expanding, and needing to purchase many LiDAR sensors.

It was also ironic that in 2022 Forbes had tried to go public via a SPAC deal of their own, but called off the process because by then the hype of SPACs had completely subsided. Though this unfortunately left Binance as the second biggest shareholder of Forbes.

In November 2023 the deal to acquire Forbes fell apart. The Russel-led group “couldn’t deliver on closing” according to a Forbes spokesperson. Part of the problem was likely that Russel was alleged to just be the front for a Russian tycoon.

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Luminar Finances

The big question of course is simply how well Luminar is doing financially. At first glance it appears that they are doing quite well. They have significant sales, $70 million for 2023, and they have been increasing as desired:

But then of course we need to look at the costs, and they have been increasing dramatically, far more than the revenue. The 2023 costs of Research & Development alone were $289 million.

And the resulting profits are actually quite outrageous losses. For 2023 the loss was $571 million dollars.

It also instructive to look at efficiency to see how well their 800 employees are contributing financially. Turns out their revenue per employee is just $87k/year, which is not that great. And the loss per employee is $714k/year. It is impressive, in a negative way, that each employee can cost/spend so much.

And their cash reserves are critical. As of the end of 2023 they had $300 million.

As doubt rises about autonomous robo-taxis, Luminar’s approach of enhancing drivers and on production vehicles, rather than attempting to replace them, has started to pay off.

Luminar Fourth Quarter & Full Year 2023 Financials

And their 4th quarter 2023 press release doesn’t describe anything that might turn the company around. While, yes, there are a good number of existing partnerships, nothing new has been touted for a while. It is interesting, though, that they are clearly pivoting away from autonomous vehicles and robotaxis in particular. Clearly the financial hype of AVs has now been thoroughly dispelled.

Their stock has been on the usual SPAC trend of spiking after the merger/IPO and then down, down, and some more down, over 95% down from the peak:

And for the last year the downward trend is still at least as pronounced. Investors do not see the company doing what is necessary to succeed. There simply is no turnaround in sight.

Luminar conclusion

With a 2023 loss of $571 million, cash reserves of just $290 million, and declining faith by investors, it appears pretty clear that even though Luminar is the likely the leader in LiDAR revenue, they are not long for this world. They will start self destructing in a year. But perhaps this will be an excellent opportunity for Austin Russell to go back to Stanford and finish up his degree.

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Ouster

Ouster is a San Francisco based LiDAR company, founded in 2015. From the article SPAC Fever: Autonomous Vehicles in July 2021:

Ouster is another lidar startup company that has gone public via a SPAC. Ouster was founded in 2015 and received $90 million in VC funding. Ouster’s revenue was nearly $19 million in 2020 and projects sales exceeding $33 million in 2021. Ouster is providing lidars to a variety of segments including multiple AV use-cases, ADAS, robotics, mining, warehouse and port-shipping automation.

On December 22, 2020 Ouster agreed to go public via a SPAC merger with Colonnade Acquisition Corp. The valuation at that time was $1.9 billion. The merger was completed on March 12, 2021 and Ouster raised around $300 million in additional capital.

SPAC Fever: Autonomous Vehicles

Angus Pacala and Mark Frichtl founded Ouster in 2015, along with two other former Stanford University classmates, after working at laser-based sensing company Quanergy, which Pacala had co-founded. Unsurprisingly, Quanergy also did an IPO via a SPAC.

And after the hype bubble…

Ouster enjoyed the hype bubble stock market for 6 months. But currently its stock is down 95% from pre-IPO value, and down 97% from its peak in December 2020. $1.8 billion in market cap simply disappeared.

They now have a market cap of just $200 million.

In 2022 they had revenue of $40 million and a GAAP loss of $139 million, burning about $100 million a year. Total for first three quarters of 2023 is GAAP loss of $335 million, EBITA loss of $69 million, and revenue of $58 million.

The short of it is that while they are doubling revenue in 2023, their losses are still very large and their market cap has been decimated. They will likely continue operation for a few more years, but SPAC investors lost a fortune.

Plus.ai

Plus.ai is another autonomous trucking company. Founded in 2016 and based in Cupertino, California, and founded by Stanford students. From the article SPAC Fever: Autonomous Vehicles in July 2021:

Plus is a developing an AV software and hardware platform for autonomous trucking. Plus was founded in 2016 and has received $520 million in VC funding. Plus is using an aftermarket business model where it provides the hardware and software for the autonomous driving system that can be used on most existing trucks. It is testing autonomous trucks in China and U.S. and plan future testing in Europe.

Plus is planning to merge with Hennessy Capital V in SPAC agreement that was announced on May 10, 2021. The SPAC deal give Plus a valuation of $3.3 billion and will raise about $500 million when the merger closes.

In June 2021, Plus received an order from Amazon to purchase at least 1,000 Plus autonomous truck retrofit units. As part of the order, Amazon received warrants for 20% of Plus’s outstanding stock.

SPAC Fever: Autonomous Vehicles

And after the hype bubble…

After announcing the SPAC merger and valuation of $3.3 billion in May of 2021, Plus.ai and Hennessy Capital cancelled the merger in November, citing regulatory issues outside of the United States.

After the called off SPAC merger in 2021, Plus.ai has been very quiet. Their 2023 highlights simply lists tests, pilots, and partnerships, but not really any progress on the business side of things.

In 2023, Plus.ai separated its U.S. and Chinese-focused operations into two independent companies. The goal was to insulate themselves from rising U.S.-China tensions and tightening regulatory oversight from Beijing.

Given they haven’t raised any more money since 2021, when the SPAC merger fell apart, and haven’t made significant progress in creating an actual business with significant revenue, they seem to have become another zombie startup without a plan to pull out of their predicament. Would be surprised if they last another two years.

Quanergy

From the article SPAC Fever: Autonomous Vehicles in July 2021:

Quanergy is a lidar supplier that was founded in 2012 and has received $135 million in VC investments. Quanergy and CITIC Capital Acquisition Corp. entered into a SPAC agreement on June 22, 2021. The SPAC deal give Quanergy a valuation of $1.1 billion and is expected to raise $278 million when the merger closes in second half of 2021. Quanergy has over 350 customers and 40 partnerships globally.

SPAC Fever: Autonomous Vehicles

The company generated a lot of hype after it announced in 2016 that it had developed a lidar that cost $250 or less (for reference, around the same time Velodyne was selling a lidar sensor for $75,000). 

Prior to its SPAC merger, Quanergy had raised around $325m, so had attracted quite a bit of investor enthusiasm.

Humorously, they once tried to supply technology to Trump’s border wall.

And after the hype bubble…

Quanergy went public with a valuation of $1.4 billion. It took only 10 months from their SPAC IPO to when they went bankrupt in December 2022. In February 2023 their remnants were sold.

According to bankruptcy court documents, Quanergy was hampered by supply chain issues and litigation. But it is obvious that they were just a financial house of cards.

Velodyne Lidar

Velodyne is notable for being the first LiDAR company to go public via a SPAC. From the article SPAC Fever: Autonomous Vehicles in July 2021:

Velodyne was the pioneer in lidar technology and was founded in 1983. It’s lidar technology was developed in 2005 for the DARPA challenge. Velodyne received around $225 million in VC funding. Ford, Baidu and Hyundai Mobis were leading investors.

Velodyne and Graf Industrial Corporation announced a SPAC agreement to merge on July 2, 2020. This was the first SPAC in the AV market. The merger closed on September 30, 2020. The valuation at IPO was $4.0 billion and $150 million was raised.

SPAC Fever: Autonomous Vehicles

Does anyone know how to mass-produce LiDAR other than me? It turns out I’m the critical link in this whole thing.

David Hall, founder of Velodyne

The company was founded by David Hall in 1983. Velodyne was originally an audio equipment company, selling speakers with a patented sub-woofer starting at $2,000. Hall thought of himself quite highly.

Velodyne could only have gone public via a shady SPAC considering that their revenues were steadily going down every year. They certainly could not have pulled off a traditional IPO given their downward trajectory at the time:

Velodyne revenue was $95 million in 2020, $101 million in 2019, $143 million in 2018 and $182 million in 2017. It looks like Velodyne’s revenue has been falling from declining lidar prices and increasing competition.

SPAC Fever: Autonomous Vehicles

And after the hype bubble…

After their SPAC IPO they celebrated with the usual lawsuits:

Since the Velodyne IPO, there has been a falling out between the Velodyne founder and current management and lawsuits have been filed. It is difficult to determine if the lawsuits are due to the SPAC activities or disagreement on how to reverse Velodyne’s declining revenue.

SPAC Fever: Autonomous Vehicles

After the IPO In June 2020 the stock the stock did well as it rode the hype bubble until February 2021. Then it plummeted over the next 18 months, until August 2022:

The company was mired in a very antagonistic relationship with the founder, David Hall, who was forced off of the board in February 2021. That is when the stock of the company started its decline.

In February 2023, the company merged with Ouster, another LiDAR company that did an IPO via a SPAC. That of course also did not turn out well.

TuSimple (traditional IPO)

TuSimple is an autonomous truck company, founded in the US in 2015. It has received over $640 million in VC funding and had nearly 900 employees worldwide as of 2021.

TuSimple was the first AV company to go public via a traditional IPO. TuSimple started trading on NASDAQ on April 15, 2021. They raised $1.35 billion and their valuation was $8.5 billion at that time. Key for them is that the SPAC market was so hot for autonomous vehicle companies at the time that they generated enough interest to do a big traditional IPO. So even though a SPAC was not involved, SPACs still enabled their successful IPO.

And since the TuSimple hype bubble…

TuSimple missed its 2020 and 2021 revenue targets by a wide margin.

In December 2021 they performed an 80-mile driverless test run on public roads. They did so without first running half of the expected runs with a safety driver. And they performed the driverless test without first informing its security teams.

In April 2022, an autonomously driven TuSimple truck veered across a highway and ran into a concrete barrier. TuSimple blamed human error instead of their autonomous system. But the WSJ reports that the TuSimple was defective:

To the embarrassment of TuSimple, a video of the crash is available, along with an explanation of what happened (purportedly by a TuSimple employee).

Their top safety official was fired for not going along with poor safety practices.

Their financials were horrible, never achieving significant revenue. In 2022:

In December 2023 TuSimple was down to just 30 employees (from peak of 1,400), valued at just $229 million, delisted from NASDAQ, pretended to move to China, and started looking for a buyer.

Cheng Lu previously served as TuSimple’s CEO from September 2020 to March 2022 before he was ousted by Xiaodi Hou. In October 2022, Hou was fired after an internal investigation related to a possible technology transfer to a Chinese company Hou started. After Xiaodi Hou’s termination, TuSimple’s Chief Operations Officer, Ersin Yumer, was named interim CEO.

And in late 2023 a federal probe was initiated about improperly transferring technologies to China. There are also of course multiple shareholder lawsuits.

Latest news certainly sounds like they shut down:

So long, TuSimple. Congrats on flushing $8.5 billion evaluation down the drain. Certainly hope that other companies do not deploy driverless trucks on public roads before they are ready.

Kodiak Robotics (no IPO)

Kodiak Robotics was founded in 2018. In November 2021 Kodiak announced an investment round of $125m, for a total raise of $165m since their founding in 2018. Interestingly, TechCrunch was told that the leader in the $125m round was a special interest financial vehicle set up by a freight and logistics company. While that sure sounds like a SPAC, it isn’t, and the company is not public. It actually appears that they missed the SPAC bandwagon and therefore will likely have trouble raising enough money to become commercially viable.

In December 2022 Kodiak branched out and received $50m for work with the army’s Robotic Combat Vehicle program. It is to help the US Army develop self-driving vehicles for reconnaissance, surveillance, and other “high-risk” missions. Automating war seems incredibly dubious for a startup.

January 2024 announce their sixth-generation semi truck where each critical mechanical component, including braking, steering, sensors and computers, are redundant for “safety”. The new vehicle has 12 cameras, four lidar sensors, and six radar sensors. But this glosses over the important issue that safety of AVs has never been about limiting failure of the mechanical components. Instead, it is always about the effectiveness of the automated driving system in the first place, something that Kodiak apparently is not focusing on. When it comes to redundancy the only issue is to make sure there is a human safety driver to pack up the inherently problematic automated system. Kodiak still appears to be on the wrong track, making their future questionable.

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Electric Vehicle SPACs

EV companies needed huge amounts in capital in order to manufacture their vehicles. The timing coincided quite well with the takeoff of SPACs in 2019. Very similar to the Autonomous Vehicle hype cycle.

Lucid

Yet another Electric Vehicle company. Founded in 2007, so have been around for 17 years. The combined value at the time of the SPAC merger quickly rose to roughly $57 billion — bigger than Ford Motor Co. Over the last two years the stock has dropped from $55 to $3.10, down 94%. They are still running and worth a few billion dollars, but they don’t appear to be truly viable. In 2023 they only manufactured 8,428 vehicles, and lost $2.8 billion doing so. They will surely run out money.

One of the few bright sides is that 60% of Lucid is owned by the Saudi Arabian sovereign investment fund. At least retail investors didn’t take the brunt of the loss.

The folks behind the SPAC certainly did well. As part of its SPAC deal, Klein and his partners received 51.75 million shares, and bought 42.85 million warrants at $1 a piece. At going market prices, their stock is worth about $1.26 billion. They stand to make $553 million more on the warrants.

Nikola

And yet another EV company, this one specializing in EV trucks. Don’t really need to elaborate. Their stock shot up to $65 and now is at $0.67, a drop of 99%.

Oh wait, do need to elaborate. Nikola in 2018 created a video showing their super cool EV truck driving. But it turns out the video was intentionally deceptive and Nikola was just rolling the semi down an incline to make it look like it was moving.

Oh wait, there is even more worth mentioning. The founder of the electric truck company Nikola was sentenced to four years in prison in December 2023 in a fraud case that highlights the financial carnage left behind by a crop of electric vehicle start-ups and their promoters. A federal judge in Manhattan, Edgardo Ramos, sentenced Trevor Milton, Nikola’s founder and former chief executive, after a jury found him guilty in 2022 of one count of securities fraud and two counts of wire fraud. Mr. Milton was accused of pumping up the value of Nikola stock by making extravagant claims about the company.

Lordstown Motors

And yet another EV manufacturer, this one of electric pickups. They were famous for acquiring the former GM Lordstown plant and was going to save a lot of jobs. In October 2020 they did a SPAC and suddenly the company was worth $1.6 billion. Then pesky Hindenburg Research investigated Lordstown and found a history of fraud. Key issues were that Lordstown greatly exaggerated orders for their vehicles and that they were going to miss their production timeline by years. Also, company executives and directors had sold about $28 million of stock, according to Hindenburg, in the 7 months since the SPAC was completed, reflecting that they seemed to have little faith in the future of the company.

The day after the Hindenburg report was published Lordstown stock dropped by 17%. GM, the owners of Cruise AV company, had invested $75m but then sold off their investment by end of 2021.

In June 2021, just 8 months after their SPAC, Lordstown announced that they did not have enough money to begin production of their vehicles, and that bankruptcy was possible. On September 27, 2023 Lordstown filed for bankruptcy and sold everything to ex-CEO Steve Burns, for a paltry $10M. Lawsuits ensued. A shareholder lawsuit on the SPAC was resolved for $15.5m on March 4th, 2024, long after the company went bankrupt.

For additional details of the collapse of Lordstown see the Verge article As Lordstown immolates, SPAC deals that didn’t go to zero feel like the exception.

Faraday Future

And yet another United States EV manufacturer with a SPACtacular downfall. Founded in 2014, they had many plans for opening up various factories and planned on releasing their first vehicle in 2017. But by 2016 there were already many doubts about their financial viability. There were multiple failed almost investments and multiple rounds of big layoffs. The company’s founder Jia Yueting filed for personal bankruptcy in October 2019.

In January 2021, it was desperation time, so you guessed it, SPAC time! They raised $1 billion. As expected, the money was flushed down the drain and the stock quickly dropped by 99.99%.

In February of 2024 they received an eviction notice for not paying rent totaling $917,887.26.

And on March 1st Faraday issued a recall for all 11 of the vehicles it built in 2023. Yes, 11 vehicles. So long Faraday. Was short yet exciting ride.

Arrival

A British EV manufacturer, started by a Russian telecoms billionaire. They are notable because after their initial SPAC in March 2021, they tried to do a second one, within a three year span. The second one did not work out and was never closed.

As with many SPACs, Arrival promised nebulous game changing technologies like building electric commercial vans and buses in extremely compact “microfactories” that could be located in city centers.

For their first SPAC Arrival claimed to have received $1.2 billion in orders, which would have been great if true. They raised $400m and their valuation was claimed to be $5.4B. At the time they only had two working prototype vehicles, and of course no sales at all. By the second, aborted, SPAC they had  repeatedly delayed its production launch, pivoted and changed market focus, burned through millions of dollars, and restructured the company three times. 

On January 29th the company was delisted from NASDAQ. They have now entered administration, the British version of bankruptcy, and are trying to sell off any remaining assets. Once valued at $15 billion and backed by Hyundai and UPS, they were last valued at under $5 million (yes, million).

The stock price followed the typical SPAC trajectory. Even before the merger was completed the stock tripled in value. And then there was an incredible downward fall until the stock was virtually worthless.

Lotus Vehicles

Yes, the Lotus race car company. They were bought by Geely, an ambitious Chinese company, in 2017. The plan is to only make electric Lotuses moving forward. Shockingly, the SPAC listing just happened in February 2024, well after the SPAC bubble burst. Their timing is quite unfortunate since the SPAC merger happened right when EV sales started to greatly miss expectations.

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Other SPACs of interest

Most of the SPACs were for outside of Electric Vehicle and Autonomous Vehicle industries. But they are worth reviewing because they further show how SPACs are typically a sign of financial hocus-pocus.

TruthSocial/Trump Media

Of course Donald Trump would be interested in a financial scam that could benefit him. Digital World Acquisition Corporation (DWAC) was started after the last election. Idea was to merge with Trump Media in order to fund the company and in order to cash in on Trump’s notoriety. To make this work out DWAC promised Trump 90% of the resulting stock. But there have been huge ups and downs, multiple investigations, criminal charges, and of course lawsuits. Due to delays and poor prospects, last year DWAC had to return $1 billion to investors that had been earmarked to buy Truth Social. But DWAC has become a MAGA meme stock, so for now its price continues to be inflated by the true believers and momentum investors who follow waves.

End of January the SEC granted its approval for the merger to move forward. But then more lawsuits were filed. But then on 3/9/24 the remaining obstacles to the merger were lifted. A shareholder vote to approve the merger is scheduled for 3/22/24. Still, the prognoses for the merger is somewhat cloudy.

It has been frequently misstated that Trump could obtain $3-4 billion of value from this deal if it is completed, but this is not true. This false idea is premised on the stock value being maintained after the merger. But the current stock value is high solely due to there being very limited shares available in DWAC, while there is a great deal of interest in the stock from the MAGA faithful. But if the merger is completed then the stock will be worth only the true value of TruthSocial. But TruthSocial isn’t a viable company. It is mostly a platform for one person to spout off in all caps, has a limited audience, and very limited advertising potential.

And Trump will have a 5-month lock in period where he cannot sell the stock. This means that Trump’s share will never actually be worth much, regardless of the outcome of the election. But ownership of the stock could still provide Trump with a financial lifeline for the lawsuits he is dealing with. Trump could transfer shares to a trust and use the stock as collateral for a loan.

The business has struggled, with Trump Media losing $49 million in the nine months through September while generating just $3.4 million in revenue, according to regulatory filings. As such, the company has warned that it may run out of cash without the merger, filings show. Of course, even with the merger it will run out of cash. It will just take longer.

WeWork

WeWork was founded in 2010 by co-founders including the rather toxic techbro Adam Neumann. The hype-bubble valuation got up to $47 billion in 2019. And this was for what basically amounts to a boring old-fashioned leasing company.

In August 2019 WeWork tried to undertake one of the most botched IPOs of all times, but then had to call it off. Attempting an IPO required WeWork to publish its actual financials, and they were grim, including a $1.9 billion loss on $1.8 billion in revenue in 2018. The company valuation was suddenly $10 billion instead of $47 billion just a few months before. Due to the botched IPO, and also incredible self dealing by Neumann, he was forced to step down from CEO role and leave the company. Still, Neumann received $1.7 billion from Softbank, and was retained as a consultant with an annual salary of $46 million.

During the COVID pandemic and the surge in working remotely, WeWork of course started to perform even worse financially. That means it was time for the magic of a SPAC! In October 2021 the SPAC was completed, but since WeWork wasn’t a viable business in the first place it continued on its downward trajectory. In November 2023 they finally filed for bankruptcy. They still exist but of course are getting sued left and right by property owners that the owe money to.

Virgin Galactic

Even the very first Chamath Palihapitiya SPAC was incredibly dubious. Virgin Galactic was doing horribly. And their other source of money, from Saudi Arabia, was suddenly problematic due to the publicity of the government assassinating a prominent journalist, Jamal Khashoggi.

Then he alighted on Virgin Galactic, which had been founded, in 2004, by Richard Branson, the celebrity entrepreneur, with an aim of building rocket ships to ferry tourists into space. The company was a marketing sensation: more than six hundred people had reserved seats, making deposits totalling eighty million dollars. But in almost every other respect it was a disaster. In 2007, three workers were killed when a rocket motor exploded. Seven years later, a pilot died during a test flight. Virgin Galactic had spent hundreds of millions of dollars without sending a single tourist into space.

To finance the company, Branson had persuaded the Saudi Arabian government to invest a billion dollars. But in 2018 the Saudi crown prince, Mohammed bin Salman, was implicated in the murder and dismemberment of the Washington Post journalist Jamal Khashoggi. It would be unethical—and a public-relations disaster—to accept Saudi funds. Branson urgently needed a new source of capital. That’s when Palihapitiya’s company proposed a SPAC merger.

Palihapitiya and Branson hit it off. “These guys are born salesmen,” a tech-industry banker who is familiar with both men told me. “It’s like watching someone trying to have sex with their reflection.” They rapidly came to an agreement: Virgin Galactic would receive hundreds of millions of dollars from I.P.O.A, as well as a hundred million dollars of Palihapitiya’s personal funds; Palihapitiya would own nearly seventeen per cent of Virgin Galactic.

New Yorker

The Virgin Galactic SPAC stock did quite well, at first. But the company performed exactly opposite to the incredible hype and forecasts that were dumped on the investors.

On October 28, 2019, Virgin Galactic débuted on the New York Stock Exchange, opening at $12.34 a share. Within four months, it had climbed to forty-two dollars. A year later, it reached sixty-three. Soon, the company was worth more than six billion dollars, buoyed by the same kind of social-media chatter that drove up the stock prices of GameStop, Tesla, and BlackBerry. Still, thus far, Virgin Galactic has failed to achieve essentially every projection set forth in Palihapitiya’s merger proposal. For example, the forecast for 2020 revenues was thirty-one million dollars, but the company collected only two hundred and thirty-eight thousand dollars that year.

New Yorker – May 31 2021 – The Pied Piper of SPACs

Finally on June 29, 2023, Virgin Galactic had its first commercial space flight. And on January 6, 2024, they had completed their sixth.

23AndMe

Remember how exciting 23andMe was, with all the “spit parties” and lots of celebrities? The company has been around since 2006, with some ups and downs, including a giant data breach in October 2023.. But in February 2021 they went public at a valuation of $3.5 billion and shot up to $6 billion. The SPAC was founded by Richard Branson, yes, he same person behind the ill fated Virgin Galactic dumpster fire. Lately they are valued at $262 million, a 95% drop. 23andMe has raised about $1.4 billion, and spent roughly 80% of it over the life of the company and have spent 80% of that. If you are wondering how they managed to do all of this, see the short and interesting video from WSJ or the in depth article from WSJ.

And here is the chart just for the last year so that you can see that the stock has been continuing to plummet:

Archer Air Mobility

Electric airplanes! Flying cars! The future!!! In April 2020 a round of seed funding valued Archer at $16 million. Moelis’s deal has placed a higher value on the company: $3.8 billion. In other words, in less than a year, the valuation has jumped 23,650%.

They had been testing an 80%-to-scale prototype at private airfields in California. It hasn’t carried pilots or passengers. The company says it will turn out 500 flying taxis by 2026. United Airlines has promised to buy at least 200, provided a range of conditions are met, to spirit passengers from Hollywood to Los Angeles International Airport. Archer says it’s the only company in its space — that is, electric vertical takeoff and landing aircraft, or eVOTL — that has secured a commercial contract for orders. It also has a major auto manufacturing partner with plans to make electric cars. With these kinds of dreamy projections the rise, and fall, of Archer was inevitable.

The market value dropped by 80% in ’21 – ’22. And in ’23 the stock rose a large amount. Unlike many SPAC companies, they still exist, for now. Humorously, they are still working on flying cars.

Blade Air Mobility

For flying rich people, perhaps those who have made lots of money off of SPACs, to the Hamptoms. And they claim that eventually these flights will be done using electric vertical aircraft, such as Beta Technologies’ Alia-250 (when the technology is available). Once again, SPACs and false hi-tech promises go hand in hand. Stock has dropped over 80% from high of $18.40/share. Not at risk of bankruptcy for a while, but give them a bit of time…

Counterpoint – Draftkings

While the vast majority of SPACs tanked, Draftkings is a notable sort of exception. Draftkings is a daily fantasy sports contest and sports betting company. Just as dubious a business as many of the other SPACs. Hindenburg Research even reported that Draftkings has ties to organized crime in Bulgaria and illegal betting around the world. They even planned to get into NFTs in 2021. Definitely the kind of company you would expect to do a SPAC.

They even hired some famous “advisors” for window dressing, including Cal Ripken Jr., Michael Jordan, and Gisele Bundchen (of FTX fame).

In April 2020 they completed one of the earlier SPACs and were then valued at $3.3 billion. Everything was going quite well. In May of 2021 they were considered one of seven most successful SPACs of the previous year, having gone up 147%.

Reality did set in for 2021 and 2022 and the stock dropped 85%. But unlike most dubious SPAC companies, Draftkings had a really good 2023, their stock doubled from its low, and they expect to continue to do well.

So while a dubious company that does a SPAC is usually pretty suspect and a financial loser, Draftkings shows that there is at least one exception.

Counterpoint – iRobot

iRobot never did a SPAC. But they aren’t doing well at all, kind of like Peloton.

For years they failed to keep up with competitors. The final blow was that they expected to be acquired by Amazon but European regulators scuttled the deal. They did not have an alternate plan in place.

A Motley Fool article explains their situation:

At just $583 million booked year to date, the company’s sales have declined about 30% from the nine-month period ending around the time of Amazon’s buyout offer. Trailing-nine-month losses — $240 million at last report — are up 20% from the year-ago period as well. iRobot’s not looking particularly healthy right now, and the fact that it will now need to go it alone and try to fix itself without help from Amazon and its $64 billion cash hoard (iRobot itself has less than $200 million in the bank) is going to make that a tough slog.

Add in the fact that iRobot’s business seems to be going in circles since 2002, when it invented the Roomba robot vacuum, and iRobot has gone full circle from expanding its product line by offering robot mops, robot gutter cleaners, and robot pool cleaners, back to … offering just robot vacuums and mops, and I’m not at all convinced this company knows where it’s going. As a business, iRobot resembles nothing so much as a Roomba that’s lost its guidance, and is just endlessly circling the same patch of floor, cleaning and recleaning the spot it started at 20 years ago.

Motley Fool – 1/29/24

And if you would like to know more about how iRobot got into this sticky situation, even without a SPAC, I recommend this video:

So while SPACs are usually a sign of a distressed company, a distressed company doesn’t always mean that a SPAC was involved. Some companies simply run themselves into the ground.

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Finis. This indeed became an absurdly long article.