Arrival Ltd, an electric vehicle manufacturing company founded by Russian billionaire Denis Sverdlov in 2015, is worth about $15.3 billion. Sverdlov has been struggling to bring up his new startup four years, injecting a total of $450 million into the truck and bus maker. In November last year, CIIG Merger Corporation, a special purpose acquisition company (SPAC), merged with Arrival and made it a public traded company.
According to the Bloomberg Billionaires Index, Sverdlov will soon be worth $11.7 billion, A 3000 % gain, thanks to the merger. The 42-year-old, whose wealth also comes from a telecom startup, will control most of the Arrival’s stock after the agreement is finalized.
SPACs have gained popularity over the past decade, with companies such as Virgin Galactic leading the pack to go public. A blank cheque company merges with private companies to allow the investors to trade stocks as in a public entity. In 2021, SPAC transactions have been valued at $85 billion.
Celebrities and the ultra-rich have ventured into the blank cheque company business. Athletes such as Alex Rodriguez, Shaquille O’Neal, and business moguls, the likes of William Ackman and Gary Cohn, former Goldman Sach’s chief own several of these SPACs.
Other companies that have gone public through SPACs include Archer Aviation, an Air taxi startup valued at $16 billion, a sharp increase from $3.8 billion in April 2020. Besides, Lucid Motors, a luxury mobility carmaker, merged with Michael Klein led Churchill Capital IV Corporation for $55 billion, making the deal the largest SPAC transaction between a blank cheque firm and an electric car company.
“SPACs are a bonanza for those arranging them,” noted Keith Johnston, SFO Alliance CEO.SFO Alliance is a London-based investment organization for single families.
US is leading with the highest number of SPAC transactions followed closely by Europe. However, since February this year, the performance of SPACs has fallen by almost 20%. Not all SPAC transactions have increased the valuation of companies after going public. A merger between Cerberus Telecom Acquisition Corporation and Motion Acquisition Corporation saw the stocks trade below $10, the standard SPAC initial public offering (IPO).
Arrivals have said this deal will make it avoid financial problems experienced by most vehicle maker startups. The London-based company will build small factories that cost little money to construct instead of building the large factories built by commercial automakers. The startup intends to start tests for their EVs on public roads before 2021 ends and build approximately thirty-one plants by 2024.
“There are more than 560 cities in the world which have a population of over one million people, and each of these cities could have a micro-factory producing ten thousand vehicles specifically tailored for the needs of that market. This model can be scalable as McDonald’s or Starbucks,” said Sverdlov.