Special Purpose Acquisition Companies (SPACs) are the preferred way for electric vehicle (EV) startups to go public. The latest EV company to join the SPAC boom is Tritium, which has just announced that it will join forces with it Decarbonization plus acquisition II (NASDAQ: DCRN) in a deal valued tritium at $ 1.2 billion.
Here’s what EV SPAC investors need to know.
What is tritium
Tritium is an Australian company that specializes in the manufacture of EV charging stations. The company was founded in 2001 and initially focused on the development of solar racing cars. Since then, the company has been working on DC fast charging technology.
The company’s model includes pre-sales of hardware and recurring income from software and services. Most of the current income comes from the sale of charging stations to local hosts. To date, Tritium has sold over 4,400 DC fast chargers (under 50 kW).
Tritium has developed what is known as a modular, scalable charging platform (MSC) that can be used to update charging stations after the first purchase. The chargers are liquid-cooled and available in various power levels from 50 kW to 350 kW.
The electric vehicle charging infrastructure market is projected to grow from $ 3 billion in 2020 to $ 50 billion in 2026. Tritium notes that the expansion of infrastructure is expected to come first, while the adoption of electric vehicles among consumers will follow, as people are more likely to buy an electric vehicle if they are confident that there are enough charging points.
Total sales were $ 59 million in 2020, up from $ 50 million in 2019. That doesn’t seem like particularly impressive growth, but Tritium notes that its supply chain was severely disrupted last year by the COVID-19 pandemic has been. Approximately 96% of sales in 2020 came from charger sales, only 4% from software.
Like many SPAC deals, Tritium highlights extremely optimistic forecasts for future growth. The company expects sales to exceed $ 1.5 billion in 2026. At this point, it assumes that software and services will account for over 25% of sales.
How the deal is structured
Decarbonization Plus Acquisition II currently has approximately $ 403 million in cash in its escrow account and there is no PIPE (private investment in public equity) component. Tritium currently has approximately $ 5 million in cash. The transaction values Tritium at $ 1.2 billion and post-money equity value of $ 1.7 billion upon completion of the combination.
An estimated $ 108 million of this total cash will be used to pay down debt and cover transaction costs, with $ 300 million on the combined company’s balance sheet. Existing Tritium shareholders will roll over their equity and are expected to own 70% of the new company. The SPAC public investors will collectively own 24%, while the SPAC sponsors will take home a 6% stake to put the deal together.
Tritium estimates it will only need $ 68 million in capital to generate positive free cash flow in 2023. After the merger is complete, the ticker symbol changes to “DCFC”.
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