Autonomous Vehicle Engineering - March 2021 - 2

Editorial
EDITORIAL

SPAC attack
It takes money to create and manufacture automobiles and that hasn't
changed since the advent of mass
production. And the next generation
of electrified vehicles (EVs), with their
expensive batteries and automated-driving systems, will not be any less
chained to finance.
But this SPAC thing has become a
little worrying.
Forget venture capital and its
arcane investment logic that left many
in the " traditional " automotive structure perplexed and annoyed. Special
Purpose Acquisition Companies make
venture capital look as old-fashioned
as compound interest. The so-called
" blank check " structure of SPACs rather
suddenly has emerged as the funding
vehicle du jour for electric-vehicle (EV)
startups - many of whom have been
pumping the automated-driving potential of their yet-to-come machines.
I won't waste space describing
SPACs; you can find that elsewhere. But
those who are watching the trend play
out know this much: Along with rushing
no-revenue companies to public ownership, SPACs invariably derive outlandish
valuations for those companies. In effect,
SPACs are formed by monied financiers
to attract investors large and small who
are willing to roll the dice on a promise.
Risk underlies investing in any
company. But remember that SPAC
targets often are startups that have
yet to sell a thing. They have little but
years of spectacular cash burn in their
foreseeable future. No wonder, then,
that flashy EV startups such as Nikola,
Fisker and Lucid Motors have emerged
as SPAC darlings. All ply a tacit business
promise to replicate or even improve
upon Tesla's allure for the automotive,
tech and financial sectors.

2 March 2021	

" Investors gonna invest, " one might
be inclined to shrug. But the risk isn't just
theirs. The SPAC shortcut to the investing
public's pockets is causing concern in
some corners of the autonomous-vehicle
(AV) development community. First, if
some high-profile SPAC-financed autoor AV-related companies go belly-up, it's
certain to spook future investors. More
troubling is the complicated ownership
structure of SPACs that can result in
many owner " classes, " including investors who financially staked the company
prior to the SPAC merger.
This situation seems ripe for
conflict, leaving many perhaps thinking
they've earned the right to provide
input about how or what products are
developed. While there's potential for
this with venture capital and traditional
finance, of course, it seems to me to be
magnified by a SPAC.
I recently had a conversation with a
principal at an established AV hardware
and software company about this trend.
She expressed concern that SPAC investors could disrupt the rational decision
making expected from startups and
smaller tech companies with whom her
company currently does business. " If I
know this company went public via a
SPAC, I'm layering on an extra degree
of caution, " this source asserted.
Judging by the choppy waters hit
by Churchill Capital Corp. IV (CCIV), the
SPAC that merged with Lucid to take
Lucid public - CCIV shares plunged
after the deal was announced - the
SPAC phenomenon deserves scrutiny.
For all the credible upside for AV-related
startups anxious for funding, the SPAC
route has a potentially dark underside
that should dictate caution at this fragile
time for vehicle R&D.
Bill Visnic, Editorial Director

Bill Visnic
Editorial Director
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AUTONOMOUS VEHICLE ENGINEERING
Autonomous Vehicle Engineering - March 2021

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