Matt’s Top 3 SPAC Targets – Infrastructure Week


Matt’s Top 3 SPAC Targets – Infrastructure Week

SPACInsider contributor Matt Cianci this week compiled his three favorite potential SPAC targets that stand to benefit from a large-scale government investment in infrastructure. We look at why they are compelling and why each could be a fit for a blank-check merger.

The Biden administration’s big infrastructure bill hasn’t passed yet, nor has a final draft been set, but certain broad strokes are likely to remain the same. Namely, it’s going to be big. The current proposal is $2 trillion over eight years, while GOP senators have countered with $568 billion over five.

Assuming the final version is closer to the Democratic proposal, much of this largesse is going towards sectors that have already been primed with SPAC cash. The bill currently includes grants and incentives for entities to build a network of 500,000 charging stations by 2030. In total, about $174 billion in the bill is earmarked for boosting electric vehicles.

Companies in the charging infrastructure space like recent SPAC targets ChargePoint (NYSE:CHPT) and Nuvve (NASDAQ:NVVE) could certainly stand to benefit from this funding. Meanwhile, the EV-makers themselves targeted by SPACs might be even more de-risked with that money in the air. But, the incentives would also presumably propel competitors forward and lower barriers to entry.

Both infrastructure proposals would pour billions into construction of bridges, highways and broadband service alongside retrofits of water and power systems. The Biden plan spreads the Benjamins far wider, however, encompassing affordable housing, assisted living and education.

Factory OS

Stepping in to make sure that activity is even more efficient is Factory OS.

The California-based company has targeted the pre-fabrication slice of construction as an area where significant gains can be made in speeding up projects and achieving savings. It claims its off-site building processes result in jobs that are up to 40% cheaper and 50% faster.

Much of this is advanced by its partnership with construction software firm Autodesk (NASDAQ:ADSK), which helps builders design, plan and budget projects, sending a fair amount of business Factory OS’ way in the process.

Autodesk has twice invested in Factory OS, bringing the company’s total outside funding to about $77 million, according to Crunchbase. Autodesk bills itself as a one-stop shop for sourcing the best possible greenfield project and customers are understandably drawn to the cheaper and faster options that it generates. Google and Morgan Stanley also took part in Factory OS’ $55 million November Series B.

If affordable housing does remain in the infrastructure bill, then it is likely Factory OS will be building at least some of it. The company also holds the potential of checking some ESG boxes. By doing a large amount of the building process in a closed, indoor setting, Factory OS estimates that it drops material waste by about 40% as well as achieving emissions reductions by dropping demand for overall material transportation.

Factory OS also hits at a cross-section of SPACs looking for targets. Yellowstone (NASDAQ:YSAC) raised $136 million to combine with a homebuilding target while four other SPACs currently searching (ANZU, MIT, HCIC, HCIC) have designated an industrial technology focus.

Property Solutions II (NASDAQ:PSAG) and TS Innovation II (NASDAQ:TSIB) have each claimed real estate as their hunting grounds while the number of SPACs looking at proptech has soared to five – RXRA, BOAS, CPTK, PTIC, LCAP.

Energy Vault

Energy Vault may have been on SPAC radars even before the politicians began talking about “Infrastructure Week, but for real this time” as it provides a novel way of storing energy in a seemingly stone age fashion.

It has developed a technology that generates energy by stacking 35-ton slabs into a tower when it is absorbing power, and de-stacking them when it is disbursing it. This energy is captured by setting the slabs down is similar to that captured by hydroelectric dams, but instead it can be artificially replicated anywhere.

Energy Vault plants potentially have the capacity to generate between 20 and 80 megawatts of electricity and can be used as peakers to bridge gaps in renewable power generation. Energy storage has long been a hot topic in investment circles but the technology needed to scale chemical batteries to fill in generation gaps has not yet been proven to meet the need.

Long-term uncertainty about rare-earth mineral availability has also been a factor. The long technology cycle needed to produce large-scale results has also opened battery companies to risk posed by skeptical short-sellers, as QuantumScape has experienced. Its shares have fallen 59.5% on the year after completing its combination with Kensington in November.

Energy Vault would not necessarily be insulated from skeptics, but the Switzerland-based company already has a generation unit connected to the grid since July. This followed a pilot plant that was a quarter of its scale and the questions of its technology is largely built into gravity and physics.

The company was founded in 2017 and raised $110 million from SPAC-friendly Softbank in 2019. And, while it may not be the solution for the entire energy storage picture, the low costs inherent in its largely inert design make it potentially a good fit for remote and rural areas that planners have struggled to power with consistent renewable flow.

Built Robotics

While much of the Biden plan would be directed at unionized work, automation stops for no man and will be a factor in any major construction boom to come as well. Built Robotics has developed ways of fitting several pieces of heavy equipment with automation tools able to get certain jobs done before other workers arrive at the site.

This not only reduces labor costs for construction companies, but also avoids the particularly high safety and liability expenses associated with construction work.

Built’s robotics suite comes with software that can detect people, animals other vehicles and each piece of equipment is geofenced so not to go wandering off. Managers can remotely force an emergency stop on any vehicle and Built has not limited itself to Bobcat cubs. It has put its autonomous suite into excavators that weigh over 82,000 lbs.

As Built’s machines have grown smarter, so too as the money flowing into the company. Built’s $33 million Series B drew investment from the investment arm of Siemens (DE:SIE) and former GE CEO Jeff Immelt joined the company in June 2020 as an advisor.

Not all tasks may be right for the robots, but the value proposition for developers is clear with the mean annual wage of construction workers rising to just under $73,000 this year, according to the US Bureau of Labor Statistics. The country’s most populous states all host averages above the mean with worksite laborers in California making a mean wage of $83,150.

Some of the best uses for Built Robotics’ machines would be for projects both political parties have proposed – digging trenches for new water and broadband lines to go in. So, while reasonable people can disagree on the merits of either party’s bill, robots should be well served by either.