Why Bird Is Using a SPAC
By using a SPAC, Bird would have the ability to become a publicly-traded company in a fast, low-risk manner. Becoming a public company would give Bird access to a much broader capital market. At this time, Bird has been funded mainly through venture capital firms. By exploring the SPAC option, Bird may be struggling to obtain additional funding.
Will Bird Keep Flying?
Sharing economy companies like Airbnb and Uber have struggled to adapt in the light of the COVID-19 pandemic. The prospect of using the same vehicle as somebody else raises questions about cleanliness and possible infection. In December 2019, another scooter startup, Unicorn, shut down after failing to compete successfully with Bird. Today, Bird is mainly competing against Lime, a scooter startup established in 2017.
How Bird Kept Growing in 2020
A recent Bird success in Canada suggests that the company has found a way to keep growing despite the pandemic. In the summer of 2020, 40,000 unique users used a Bird scooter in Ottawa, Canada’s capital. While the Ottawa pilot project wrapped up on October 31, the participation level is significant. However, the company has faced some local criticism about where and how scooters are parked.
Why the SPAC Path to Going Public Is Taking Off
Traditionally, startup companies have taken on the time and expense of going public through an IPO. That’s the route taken by today’s technology giants like Amazon, Google, Facebook, and Oracle. While the SPAC concept has been around for years, it has surged in popularity in 2020.
This year, there have been approximately 50 SPAC companies formed in the United States. These companies have raised roughly $50 billion from investors. In contrast, SPAC vehicles only raised $3.6 billion in 2016.
By design, these companies have no operations of their own and sell no products. They exist solely to acquire another company. However, these companies are obliged to use their funds within two years. If there is no acquisition made within two years, the SPAC must return the investors’ funds.
The two-year timeframe to return funds to investors creates more opportunities to bring companies quickly in a short period.
These Startups Went Public With a SPAC
In 2020, several startups have successfully become public companies in the United States and elsewhere using the SPAC.
- Arrival, a UK based company, planned to go public with a SPAC in November 2020. When the deal is completed, the company will be listed on the NASDAQ. The electric vehicle startup is expected to obtain more than $600 million. The SPAC deal values the company at more than $5 billion.
- PureCycle Technologies, a plastic recycling company, is using a SPAC to go public. The merger deal is expected to close in early 2021. PureCycle will merge with Roth CH Acquisition. The deal values PureCycle at $1.2 billion.
- Microvast, a battery company established in 2006, is exploring using a SPAC to become public. The transaction would help the company to raise approximately $200 million to grow further. Initially, Microvast planned to apply its technology to the cannabis industry.
- Nuvve, an electric vehicle startup based in San Diego, plans to go public through a SPAC. In business since 2010, the 30 employee company has reported an operating loss. Nuvve is planning to focus on electric buses.
- Aeva, a LIDAR technology startup, is using a SPAC vehicle to become a public company. Via a merger with InterPrivate Acquisition Corp, the deal values the company at more than $2 billion. Lidar is similar to radar but uses light. This technology is popular in the autonomous or self-driving car market. Lidar is used to supplement other navigational technologies like GPS, radar, and cameras.
Who Loses in the SPAC Boom
The boom in SPAC transactions represents a loss for bankers and professionals involved in the IPO process. For example, Goldman Sachs earned an estimated $34 million in fees from the Snowflake IPO. Five large banks — JP Morgan, Goldman Sachs, Bank of America, Morgan Stanley, and Citigroup — earned approximately $19 billion in fees in 2020. Some proportion of these fees may fall if SPAC transactions and continue to grow in popularity.
About the Author
Bruce Harpham is an author and marketing consultant based in Canada. His first book "Project Managers At Work" shared real-world success lessons from NASA, Google, and other organizations. His articles have been published in CIO.com, InfoWorld, Canadian Business, and other organizations. Visit BruceHarpham.com for articles, interviews with tech leaders, and updates on future books.