This is all very funny unless you joined the hype
The SPAC tree is behind us. The attempt to use blank check companies to publicize private companies has failed to catch up with Unicorn’s backlog, and many combinations have lost value.
There are plenty of examples. For example, Latch is now worth about $4 a share. MetroMile is worth $1.27 per share. The list continues.
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Why do companies that have gone public through SPACs have so much trouble? Have they encountered any headwinds from changing market conditions that propelled them forward before? Sure.
But the damage is also self-inflicted. Since the start of 2022, I’ve been waiting for the earnings season to end so that we can conduct a meta-analysis of SPAC earnings, essentially comparing the 2021 results to previous projections. Remember that many SPAC investor presentations painted a picture of essentially vertical growth.
The pitch was quite simple: this neat, young company is going to combine with a SPAC, raise a lot of money and then grow like hell. So what actually happened? Not that.
The Wall Street Journal did the job I envisioned, so let’s listen:
Nearly half of all startups with annual revenues less than $10 million that went public last year through a special acquisition company known as SPAC have failed or are not expected to meet the 2021 revenue or profit targets they set. to investors, according to a Wall Street Journal analysis.
In fact, the Journal found that the companies that fail or are likely to meet their 2021 targets will do so at about 53%. These aren’t little misses, in other words, but wide, embarrassing fuckups.
AppHarvest, a company touting the Journal, is a prime example of the problem. In 2020, AppHarvest pitched its SPAC combination with the following chart:
Image Credits: AppHarvest investor presentation
I mean, who? should not do you want to invest in that company? It will double in 2022 from a comfortable revenue base, more than double in 2023, then generate more than $100 million in revenue over the next two years. AppHarvest promised a spaceship that you could buy.
So what actually happened? The Exchange has compiled the company’s earnings results and here is the data: