EV double-SPAC provides only weak recharge

Nu Ride

10/04/2023 16:58

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are their own.)
       NEW YORK, April 10 (Reuters Breakingviews) - SPACs are
in recycling mode. Electric-van developer Arrival just unveiled
a merger with a special-purpose acquisition company, valuing it
at $524 million. The twist: It already went public via a
blank-check deal in 2021, at a valuation some 10 times higher.
The new transaction is an expensive gamble on a second chance.
    Arrival’s fall mirrors other EV hopefuls like Canoo
 GOEV.O , Faraday Future Intelligent Electric  FFIE.O  and
Lordstown Motors  RIDE.O . All merged with SPACs that priced at
$10 per share, and now trade under $1.
    In capital-intensive businesses, cash is precious. Arrival’s
latest merger promises $283 million of it from Kensington
Capital Acquisition Corp. V’s  KCGI.N  trust account. British
startup Wejo  WEJO.O  tried a similar second-SPAC gambit, though
it anticipates backing its transaction with private investment.
Arrival does not, and to ensure Kensington investors don’t all
yank their cash, it’s offering a sweetener: Each $10 SPAC share
will receive $17 in Arrival equity.
    The huge discount reflects a weaker outlook. A presentation
accompanying the 2021 merger forecast $14 billion in revenue in
2024. A projection from Cowen analysts is now 0.01% of that
figure. Surviving long enough to make it even that far will cost
dearly. (By Jonathan Guilford)
    Follow @Breakingviews on Twitter

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 (Editing by Jeffrey Goldfarb and Amanda Gomez)
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