Apr 10, 2021 - Economy

Climate tech companies reap the benefits of SPACs

Illustration of checks

Illustration: Sarah Grillo/Axios

The past year's avalanche of special purpose acquisition companies, or SPACs, has been an unexpected boon for some investors in the climate tech industry.

Driving the news: According to an analysis by Climate Tech VC from Dec. 11, the 10 climate tech companies that completed mergers in 2020 notably outperformed, posting on average a 131% return, compared with the 50% return of the total SPAC post-merger market (assuming a $10 offer price).

  • More than 27 climate tech companies announced SPAC mergers in 2020, with more to come this year.

Yes, but: It's not been entirely smooth sailing.

  • Electric vehicle company Nikola initially garnered a lot of attention for going public via a SPAC, before a report from short seller Hindenburg Research accused it of being an "intricate fraud built on dozens of lies," reportedly setting off an SEC investigation and the departure of Founder and Executive Chairman Trevor Milton.
  • And more broadly, it's still unclear how many of these companies will fare over the long term, especially since some are pre-revenue and making bold business forecasts.

Between the lines: "At least for now, the exit window is open," says Spring Lane Capital co-founder Rob Day. "The SPAC wave has created a lot of exit opportunities for the venture folks at least. I have friends who have said to me that 2020 made their fund."

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