Quanergy Is the Latest Auto Lidar SPAC

Millennial Money
Millennial Money
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There are high hopes for the automotive lidar industry as the broader auto sector continues driving towards autonomous vehicles (AVs). Many lidar startups are opting to go public by merging with special purpose acquisition companies (SPACs), a process that does not rely on historical financials and allows companies to offer rosy forecasts.

The latest company to join the fray is Quanergy, which announced on Tuesday that it will merge with CITIC Capital Acquisition Corp (NYSE: CCAC).

Two markets are better than one

Quanergy is developing solid state lidar systems using a proprietary optical phased array (OPA) technology. The company claims that OPA is disruptive as it facilitates low cost designs ideal for large-scale commercial deployments. OPA sensors have no moving parts, improving reliability and reducing maintenance needs.

The company says that it is making steady progress in improving the performance of its OPA sensors, particularly in outdoor environments. Quanergy achieved 70 meters of range in late 2020, followed by 100 meters in January 2021. The plan is to achieve 200 meters of range by December 2021, which is the threshold necessary for automotive use.

Quanergy has already partnered with several industry heavyweights that have previously invested in the company, including Samsung, Enterprise Rent-A-Car, Daimler (OTC: DMLRY), and Geely (OTC: GELYF).

Beyond the automotive market, Quanergy also plans to target the Internet of Things (IoT) market, integrating its sensors and 3D perception software into a variety of industrial applications to deliver actionable insights for companies. Quanergy calls its solution the “eyes of the IoT.” IoT applications for lidar include sensors for smart airports, drone-based mapping, port automation, and analyzing traffic information at smart intersections, among others.

In terms of the total addressable markets (TAMs), the automotive lidar TAM is currently expected to grow from $300 million today to $10.6 billion in 2030 while the IoT TAM is forecast to expand from $2.3 billion today to $16.7 billion in 2030.

Current revenue is negligible, with just $7 million in expected sales this year. However, Quanergy has already developed a sales pipeline that should provide some revenue visibility. Revenue is forecast to reach $549 million in 2025. Investors should always view long-term forecasts with some skepticism due to heightened execution risks.

How the merger is structured

The transaction with CITIC values Quanergy at $1.4 billion. The SPAC has approximately $276 million in its trust account alongside another $40 million in PIPE (private investment in public equity) financing. After paying down debt and covering transaction fees, Quanergy expects to add $246 million to the combined company’s balance sheet. That assumes no redemptions from the SPAC’s public shareholders.

Existing shareholders will roll over their existing equity and retain 71.6% of the new company, while the SPAC shareholders will have a 20.4% stake. PIPE investors are getting 3%, and the SPAC sponsors will take home 5.1% in founder shares.

The merger is expected to close in the second half of the year, at which point the ticker symbol will change to “QNGY.”

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