INTEL by Nicholas Alan Clayton
SPACInsider contributors Anthony Sozzi and Sam Beattie this week compiled their three favorite potential SPAC targets among companies making sustainable consumer products or materials. We take a look at why they’re compelling and why each might be suitable for a blank merger.
It is difficult to judge virtually any sector based on price performance in the current market snapshot, regardless of the path they have taken to get listed. The best that can be said at this point is how good everything is compared to everything else.
From this perspective, one of the bright spots among de-SPACs are the consumer durable materials companies. The four such companies that have fully withdrawn from SPAC since 2019 – PACK, DNMR, PCT and ORGN – are now trading at an average price of $8.42, while the average price of all companies that have withdrawn from SPAC during this period was $6.01 as of Thursday’s close.
Consumer services companies that entered the market via IPO during this period had median returns of -38.1%, mirroring all SPACs, while consumer goods companies that IPOs would have done slightly worse with median returns of -46.1%.
It should perhaps come as no great surprise that consumer durables SPACs have risen above the noise given that this category of business bridges the gap between consumer staples, what people are going to buy happens, and sustainability, which will absorb some of the ESG investing that has to go somewhere.
This cohort is also set to be joined by three others who have announced deals with SPACs that have yet to be finalized. Two of them – Footprint, which has an ongoing merger with Gores VIII (NASDAQ:GIIX), and LanzaTech, which is merging with AMCI II (NASDAQ:AMCI) – are working on the industrial side to create sustainable packaging or the inputs for durable materials.
Grove Collective, which partners with Virgin Group II (NYSE:VGII), sells sustainable, plastic-free products through an e-commerce and subscription box model.
Bolt Threads is closer to the former of these two models as it supplies durable fabrics and other materials to the textile and cosmetics industries.
Its Mylo leather alternative is created from materials derived from fungus roots and has been incorporated into products from Stella McCartney, adidas (DE:ADS) and lululemon (NASDAQ:LULU) brands.
Bolt Threads, based in Emeryville, Calif., also used bio-fermentation to create Microsilk, its sustainable silk alternative that’s made from the same proteins found in spider webs and is completely biodegradable. It has used this same protein to produce both joint products in the form of shampoos and conditioners through vegan beauty brand Vegamour and also its proprietary cosmetics brand Eighteen B.
Eighteen B was launched in 2019 and later discontinued as Bolt likely realized that a business model that completely isolated it from grunt work on the retail side was more streamlined and lucrative. With that as its goal, it has already achieved unicorn status with $467 million in outside funding raised to date.
The most recent of those increases was a $140 million Series E announced not too long ago in September 2021, but that doesn’t mean it couldn’t use more logs on the fire. Bolt Threads has seen many of its business lines enter commercialization in 2021. But, their applications so far – such as in Mercedes-Benz upholstery (DE:MBG) The EQXX concept car – are largely bespoke and still far from the mass market.
While there are currently 23 SPACs specifically looking for sustainability goals, Bolt Threads’ top SPAC partner might be bleuacacia (NASDAQ:BLEU), which raised $276 million in its November 2021 IPO. While the fact that his units contained half a warrant and the right to a 1/16 share may have turned off some targets in the November market, these are far from bad, especially without a overfunded trust, in the market today.
In addition, bleuacacia is led by co-presidents and co-CEOs Jide Zeitlin and Lew Frankfort. Both are former presidents and CEOs of Tapestry.com, the parent company of the Coach, Kate Spade and Stuart Weitzman brands, and would therefore bring immediate customer synergies.
Pulpex, so to speak, already has strategic synergy to spare, but could be at this inflection point for growth and liquidity that would benefit all parties.
It was originally created as a joint venture between alcoholic beverage producer and marketer Diageo (NYSE: DEO) and Pilot Lite Ventures in 2020, with the latter owning just over 50% of the equity. Pilot Lite’s approach is to start businesses around valuable patents or Intellectual property blocked in large companies.
In this case, it is partnering with Diageo to develop its patents around the production of paper bottles. While much of the packaging space has gradually seen recycled paper products appear, glass and aluminum containers face a largely unchanged landscape. This is partly because both of these materials can already be effectively recycled. But, these recycling methods require high heat and often come with their own responsibilities for emissions or energy consumption from a sustainability perspective.
Pulpex bottles are made from 100% renewable forest raw materials and are recyclable at the curb with a 90% lower carbon footprint than glass. At the moment, this option is even more expensive than glass bottles and has other limitations. But as she continues to develop the technology, she predicts that these bottles will soon be able to handle carbonated, hot products as well as cold, still products.
PepsiCo (NASDAQ:PEP), Castrol, GSK (NYSE:GSK) and Estee Lauder (NYSE:EL) have each partnered in the packaging development process for their own products, and Unilever (NYSE:UL) has already prototypes presented.
And, while the current market climate may not be hot for pre-commercial ventures, Pulpex may already have one of the most powerful strategic partners possible thanks to its nearly 50% owner. in Diageo with its $115 billion market capitalization and large portfolio of alcohol brands like Crown Royal, Smirnoff and Captain Morgan.
As it develops, Pulpex will likely be more valuable to both Diageo and Pilot Lite as a pure durability game in a spin-off, which itself would be made cheaper and potentially contain a higher perk for sellers in a SPAC agreement.
Speaking of companies that may not see IPOs on a regular basis in their best light, Rothy’s may have seen its closest counterpart Allbirds (NASDAQ:BIRD) steadily drop -74% since its IPO. listed on November 3, 2021.
San Francisco-based Rothy’s makes shoes and accessories for men and women knit from recycled plastic bottles. The resulting products are themselves machine washable and themselves recyclable.
Other materials used in the rubber soles and insoles of his shoes are made from seaweed harvested from waterways, as well as elements taken from castor beans, hemp fibers, sand and recycled cardboard packaging.
Rothy’s production takes place overseas, but she owns the factory in China where she claims her knitting techniques produce 30% less wasted material than competing techniques. Its D2C channel also represents 98% of its total sales.
These are all points of similarity to Allbirds and rather than suffer the rude awakening it experienced after its IPO, Rothy’s can now use its current valuation to price a SPAC deal while locking in an additional price to capture the upside when the market comes back. Due to its collapse, Allbirds is now trading at around 1.6x its current revenue while other listed peers Ralph Lauren (NYSE:RL) and Chico’s (NYSE:CHS) are trading at 1.3x and 0, 6x, respectively.