As a rule, I don’t get too excited about SPACs until they have a partner and bona fide product offer. But now that Gores Metropoulos (NASDAQ:GMHI) announced its intended merger with automotive-tech company Luminar, it’s time to get focused on GMHI stock.
Of course, not every SPAC deal is a home run. But the Gores-Luminar merger lets investors bet on a key technology — autonomous vehicles — through a company that is already working with most of the biggest automakers in the world.
That in itself should get any investor excited. Let’s take a closer look.
What Is a SPAC?
First, a refresher. SPACs are special purpose acquisition companies that have been behind dozens of deals just this year to bring companies public.
SPACs, in themselves, don’t have a product of their own. They raise money through a traditional IPO with the sole purpose of finding a private company to partner with and to take that company public. Gores Metropoulos, which is headed by Alec Gores of the private equity firm The Gores Group, had its IPO in February 2019, raising $400 million.
For a private company, merging with a SPAC is attractive because it’s quicker than the traditional IPO route. Matt Levine at Bloomberg breaks it down nicely:
“Compared to an IPO, the SPAC is much less risky for the company: You sign a deal with one person (the SPAC sponsor) for a fixed amount of money (what’s in the SPAC pool) at a negotiated price, and then you sign and announce the deal and it probably gets done. With an IPO, you announce the deal before negotiating the size or price, and you don’t know if anyone will go for it until after you’ve announced it and started marketing it. Things could go wrong in embarrassing public fashion.”
Considering how volatile the market has been during the novel coronavirus, is it any wonder SPACs are popular in 2020?
GMHI Stock at a Glance
But let’s look at GMHI deal specifically. GMHI announced in August that it would partner with Luminar, which is backed by Peter Thiel. When the deal is complete the merged companies will keep the Luminar name and traded on the Nasdaq under the new ticker LAZR.
Luminar was founded in 2012 and manufactures advanced sensor technologies for autonomous cars and trucks. It expects the combined company to be valued at $2.9 billion with a market capitalization of $3.4 billion.
Luminar is best known for being a leader in LiDAR technology, which uses pulsed radar to measure the distance to a target. Such technology is critical for autonomous vehicles, which needs countless calculations per second if cars and trucks are to navigate safely.
Luminar says that is has partnerships with seven of the 10 biggest automotive companies in the world and “is set to power the introduction of highway self-driving and next generation safety systems.”
The company has created its own semiconductors and software to power its AV technology, which means it can be a one-stop shop for automakers looking to power their AV vehicles.
Investors rallied around GMHI stock after the SPAC announcement, with the stock rallying nearly 30%. However, shares fell in recent days along with the rest of the market, which means now you can pick up GHMI stock for less than $12.
The Bottom Line
While I tend to avoid SPACs until they have a product to offer, GHMI stock is an interesting name now that it’s announced its partnership with Luminar.
The autonomous vehicle space is going to take off in a big way. Estimated at 6,700 units this year, AVs are projected to grow to 4.2 million units by 2030, with a compound annual growth rate of 63%.
For a company like Luminar, there’s a lot of money to be made. And that’s an exciting reason to invest in GHMI stock now.
GHMI has an “A” rating in my Portfolio Grader right now.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
