What happened
Shares of Graf Industrial (GRAF) gained 20% on Thursday after the special purpose acquisition company (SPAC) announced plans to merge with a maker of sensors for self-driving vehicles. The deal would move its merger partner, Velodyne Lidar, onto public markets, joining a host of other companies that use SPACs to go public in recent months.
So what
Velodyne Lidar said Thursday it would combine with Graf Industrial to create a company with a pro forma market capitalization of $1.8 billion. Current Velodyne shareholders, including Ford Motor (F -0.92%), Nikon (NINOY -3.35%) and Hyundai Mobis, would own about 80% of the combined company.
Post-deal, Graf Industrial would change its name to Velodyne Lidar and change its ticker symbol to "VLDR."
Image source: Getty Images.
Velodyne manufactures laser-based systems that create a three-dimensional map of surrounding environments used in self-driving vehicles. Its tech is currently used by automakers including Ford and by Daimler's Mercedes-Benz unit.
The company claims more than 300 customers and has booked more than $500 million in revenue since inception. Velodyne said it projects revenue of about $100 million in 2020 but expects it to increase to $680 million in 2024.
Velodyne is the latest in a number of high-profile companies to go public via a SPAC merger in recent months. Virgin Galactic Holdings late last year merged with an SPAC formed by Social Capital Hedosophia.
In April, DraftKings went public via a merger with Diamond Eagle Acquisition, and electric-truck manufacturer Nikola went public earlier this month via a merger with VectolQ Acquisition.
Now what
Velodyne is capitalizing on a number of hot trends right now, including interest in SPACs and excitement about self-driving. The business has good credentials, some impressive backers and customers, and decent growth potential. But investors should be warned that these are still early days for self-driving tech, and Velodyne expects to be priced at a rich 18 times current-year sales.
There's reason to get excited about this company's prospects, but be careful not to get carried away.
