It is hard to see at first glance at Dan Primack’s always-useful daily newsletter why there should be more flotations than private equity deals given the estimated $1.45 trillion wall of dry powder held by buyout and growth equity firms but the record stock market valuations is certainly driving interest in initial public offerings (IPO).
The traditional route of asking investment banks to take a company on a roadshow and build investor demand remains while more direct routes are increasing interest. And, increasingly, the public and private worlds are converging.
One of the latest is Luminar Technologies, a US-based developer of radars for cars, which agreed to go public via a reverse merger with Gores Metropoulos, a special purpose acquisition company (Spac) sponsored by private equity firm the Gores Group and an affiliate of Dean Metropoulos.
The deal includes $400m in cash from Gores Metropoulos and $170m from an investor group of car dealership services provider Van Tuyl Companies, corporate venturing unit Volvo Cars Tech Fund, hedge funds Crescent Cove and Moore Strategic Ventures, angel investors Alec Gores, Peter Thiel, Nick and Jill Woodman and another Spac, VectoIQ. (No mention if specialty glass producer Corning, diversified conglomerate Cornes reinvested in Luminar.)
The company will have an initial market capitalisation of around $3.4bn but an enterprise value of $2.9bn, the company said. Given Luminar raised $250m last summer, this implies Luminar has effectively burned through much of its round and after the Spac deal (and related costs which can amount to a quarter of the total raised) will have about $500m in cash to continue development to global rollout of its Lidar technology.
Starting in 2022, Luminar’s hardware and software for autonomous vehicles will be integrated into car maker Volvo’s global vehicle platform. This would be an impressive achievement in a decade since launch for Luminar.
But how long Luminar stays public will, as yesterday’s column covered, be one to watch.
