A cursory view of the homepage of Graf Industrial (NYSE:GRAF) doesn’t reveal anything particularly exciting about the company. Through vague verbiage, you’ll learn that it’s basically just a blank-check company. Not too exciting for Graf stockholders, right?
But as usual, first looks can be deceiving. Nowadays, it’s becoming more common for companies to get listed on a stock exchange through a special purpose acquisition company (SPAC) rather than a traditional initial public offering (IPO).
Founded by James Graf (hence the name) and Michael Dee, Graf is a SPAC (also called a shell company or a blank-check company) that’s involved in a business combination which should appeal to autonomous-vehicle technology enthusiasts.
And the company that will result from the merger already has some very well-known investors. So (caution: bad puns ahead), let’s get in the driver’s seat and learn more about this SPAC-tacular stock.
A Closer Look at Graf Stock
Graf stock has been wiggly and wobbly this summer, providing little in the way of clear direction for traders. Just in the first couple of weeks in July, traders watched the Graf share price go as low as $14 and as high as $24.35.
Only July 2, Graf’s combination with another business was announced. This sent the share price soaring along with the trading volume on Graf stock. Shareholders with impeccable timing (and a heaping spoonful of pure luck) could have booked a 20% profit in a single trading session.
At some point, the price action of Graf stock will be irrelevant as the aforementioned merger will produce a new stock ticker. For the time being, though, it’s fair to say that the Graf bulls are firmly in control.
A Special SPAC
While SPAC mania has indeed grabbed the market’s attention, Graf’s value proposition is unique. It’s combining with Velodyne Lidar, a pioneer in driver-assistance technology.
As a result of the merger, Velodyne will remain as a wholly owned subsidiary of Graf. Meanwhile, Graf will be renamed as Velodyne Lidar, Inc., and will trade on the New York Stock Exchange under the ticker symbol VLDR.
The two companies (which could just as easily be viewed as one company) expect to close the transaction during the third quarter of 2020. Moreover, the valuation of the business combination “implies a pro forma enterprise value of” $1.6 billion.
With companies of that caliber taking a stake in Velodyne, it must have something really special to offer. And indeed, Velodyne is a pioneer in the area of lidar technology.
Don’t worry – I won’t make you look it up on Wikipedia. Lidar stands for “light detection and ranging.” It uses laser beams to form a 3-dimensional image of the surveyed surroundings.
As Velodyne explains much better than I ever could, “Repeating this process millions of times per second creates a precise, real-time 3D map of the environment. An onboard computer can utilize this map for safe navigation.”
So there’s your autonomous-vehicle connection. Lidar’s laser-based technology can quickly and precisely map out a vehicle’s surroundings. This type of driver-assistance data could potentially prevent automobile collisions and thereby save lives.
Velodyne models incredible growth in the coming years. The company projects an estimated $800 million or more in contracted revenue through the year 2024. Plus, Velodyne sees an opportunity for a revenue compound annual growth rate of 60% or more from 2020 to 2024.
The Bottom Line on Graf Stock
Graf stock will likely disappear this year, but the anticipation surrounding VLDR stock could give Graf shares a nice boost.
And if you choose to migrate over to VLDR, expect robust revenue growth as Velodyne’s innovations could disrupt driver-assistance technology as we know it.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, David Moadel did not hold a position in any of the aforementioned securities.