[Image: Luminar Technologies]
On 24 August, the Silicon Valley–based lidar development company Luminar Technologies announced that it had entered into an agreement to merge with Gores Metropoulos, Inc., a special-purpose acquisition company (SPAC). The transaction—which will leave the company with more than half a billion dollars in cash on its balance sheet, and which will result in a listing for combined firm, under the Luminar Technologies name, on the NASDAQ exchange—implies a pro forma enterprise value of some US$2.9 billion for the combined company, according to Luminar.
In announcing the merger, Luminar said that it would will use its fattened coffers to “accelerate commercial growth across its 50 partners,” and to speed up “the expansion of its product roadmap for a turnkey ‘full-stack’ highway autonomy and proactive safety ADAS [advanced driving assistance system] solution.”
Taking the SPAC route
In a SPAC, sometimes called a blank-check company, a group of investors forms a publicly traded shell company whose purpose is to find a private company in which to invest, and then bring that target company public via the listed shell company. The SPAC approach, which allows early-stage companies to avoid some of the logistical and financial challenges of a conventional initial public offering (IPO), has become increasingly popular. Indeed, in early July 2020, one of Luminar’s competitors in the lidar market, Velodyne Lidar, announced its own merger with a blank-check company, Graf Industrial Corp.
In the current deal, Gores Metropoulos—a SPAC sponsored by the global investment firm The Gores Group—will contribute approximately US$400 million in cash (raised at Gores Metropolous’ own IPO in February 2019) to the Luminar deal. Another US$170 million in proceeds will be contributed by an institutional investor group including Silicon Valley investor (and previous Luminar backer) Peter Thiel, the Volvo Cars Tech Fund, and a number of others. The deal is expected to close in the 2020 fourth quarter.
First case: Volvo
The net proceeds from the deal (after transaction expenses), according to Luminar, will remain with the company, to be pumped into activities to “support continued growth across key verticals as Luminar executes on significant production and development opportunities.”
One such key opportunity was unveiled several months back. In May 2020, the carmaker Volvo announced that it was partnering with Luminar to add the latter’s lidar technology to its next-generation Scalable Product Architecture (SPA2) consumer vehicles, beginning in 2022—with an eye toward enabling Level 4 (“hands off”) autonomy for highway driving.
While the arrangement with Volvo is farthest along, Luminar says the car company is only one of 50 current commercial partners that together “represent ~75% of [Luminar’s] target passenger vehicle, trucking and robo-taxi ecosystem.”
Toward a turnkey solution
Luminar’s offering for that ecosystem is built around a lidar system that combines a 1550-nm fiber laser source, an integrated InGaAs sensor and dual-axis scanning mirrors, all with the objective replacing the clunky car-top spinning lidar sensors with something more compact—and less costly. The company has married this hardware technology with perception software that it says it has developed “from scratch,” and which gives it the capability to provide a turnkey solution to carmakers. Indeed, Luminar maintains that it is “the only player meeting all OEM requirements for autonomy” in the current market.
In the press release and investor call announcing the merger, Luminar’s founder and CEO, Austin Russell, declared that the deal was “pivotal not just for us, but also for the larger automotive industry.” Luminar’s hope is that, supported by the deal proceeds and with the Volvo arrangement as an first entry, it will be able to scale up operations rapidly, in turn driving down unit costs and making the technology more attractive to “other automakers who are looking to similarly transition” into autonomous vehicles.