National Post (National Edition)
EV maker Lion Electric to go public in U.S. deal
The Lion Electric Co. has chosen to forgo plans for a solo initial public offering and instead pursued a listing on the New York Stock Exchange via a merger with a U.S. blank-cheque company in an effort to accelerate its growth plans.
Saint-Jerome, Que.-based Lion Electric announced Monday it's merging with Kansas City-based Northern Genesis Acquisition Corp., a special-purpose acquisition company (SPAC), in a move the companies said would lead to a listing on the NYSE with an expected US$1.9-billion market capitalization.
“We were debating internally whether we should go through an IPO or whether we should go through a SPAC,” Marc Bédard, CEO and founder of Lion Electric, told Financial Post after announcing the deal, which will provide the electric vehicle manufacturer with US$500 million in cash that will fully fund its five-year growth plans.
Bédard said numerous SPACs came calling and the availability of the capital in a short amount of time encouraged the company to skip a more conventional IPO.
SPACs are also called `blank cheque' companies as investors essentially write a cheque to a publicly traded shell company to shop for a promising private company and take it public via the listed holding company.
SPACs have emerged as among the hottest money-raising vehicles on Wall Street and Bay Street this year, raising more than US$35 billion in the first nine months of 2020 in the United States, a figure that's about half of all the money raised by SPACs since their inception in the 1980s, according to Bloomberg estimates.
Bedard said Lion Electric chose Northern Genesis for a merger because the firm's founders included Ian Robertson, who was previously CEO of Oakville, Ont.-based Algonquin Power and Utilities Corp. and had demonstrated an ability to grow that renewable energy power company.
“We thought that's a great fit and we think that speed to market is really important right now,” Bédard said, adding that the US$500 million in funding from the deal will enable the company to buy and update an existing factory in the United States and build out a battery factory in Quebec — effectively funding Lion Electric's growth plans for the next five years all at once.
Northern Genesis' Robertson said in a release that his acquisition company targets businesses with an existing customer base that can be “energized by exposure to the public markets.”
“Lion surpasses all our expectations on all these dimensions and we are confident that it has the potential to be a great public company in the emerging decarbonized economy,” said Robertson, who has an electrical engineering degree from the University of Waterloo, an MBA from York University, and a Master of Law from the Law School of the University of Toronto.
Investment in electric vehicles have gained traction as companies such as Tesla Inc. expect to win more market share from internal combustion engine cars and trucks in the coming years amid a government push around the world to accelerate climate change policies and drive down carbon emissions.
On Nov 16., the S&P Dow Jones Indices announced that Tesla would join the S&P 500 in December after the company posted its fourth-consecutive profit in the second quarter of the year. Tesla is expected to be among the 10 most valuable companies in the index.
Market interest in electric vehicles had also led to a massive share price jump earlier this year for Nikola Corp., which has designs on manufacturing electric trucks. But the value of Nikola's shares plummeted when short sellers' reports revealed promotional materials included trucks that were incapable of moving under their own power.
Nikola shares plunged another 27 per cent by close on Monday, to US$20.41 on the Nasdaq after General Motors Co. scrapped a tentative plan to take a stake in Nikola, and opted instead for a much narrower relationship between the two companies.
Bédard said that stumbles by competitors and spending plans from governments to encourage lower emissions vehicles make it important that Lion Electric deploy the capital it is raising quickly and grow its manufacturing base.
“The big difference between us and some other (original equipment manufacturer) or OEMs-to-be, is that we're already selling trucks and buses,” Bédard said. “It's not like buying a truck that'll be delivered in four to five years. Absolutely not. It could be delivered in a few months.”
Incoming U. S. President-elect Joe Biden has announced plans to replace 500,000 diesel-burning school buses with electric replacements and Lion Electric, which earlier this year announced contracts with Amazon.com Inc. and Canadian National Railway, believes it can help fulfil those orders.
“The Biden administration, what they are saying is like a breath of fresh air for everybody in the EV space,” Bédard said.
Founded in 2008, Lion Electric has built its reputation by putting a total of 300 electric medium-duty vehicles such as trucks and buses on the road.
In September, Lion said it would deliver 10 electric trucks to Amazon.com Inc. in a move that will help the e-commerce giant to reduce its carbon emissions. Power Sustainable Capital, a subsidiary of Power Corp. of Canada, is Lion's largest shareholder.
Bédard also tried to soothe Canadian fears that the company's deal with a U.S. SPAC would result in a relocation for the Montreal-area company. “Lion is still a Canadian company doing very well in the United States,” he said, rejecting concerns the firm would relocate.