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SPAC: Self-Driving Startup Embark To Go Public In $5.2B Deal

embark

An autonomous driving startup in the US with a focus on trucks has sealed a big deal to go public via the SPAC route. You may have heard this just recently (in the case of Plus) and wondering if we're repeating previous news, but no, it's another startup, an even bigger one by valuation.

  • Embark Trucks, a self-driving startup founded by two University of Waterloo dropouts, has agreed to merge with a SPAC and go public with a valuation of $5.2bn. It's a pretty lavish valuation for a company still in the R&D phase and making no money.
  • Embark will merge with Northern Genesis Acquisition Corp. II (NYSE: NGAB). The deal will hand over to the startup $414mn of cash from the SPAC and then a $200mn PIPE round, making a total of $614mn.
  • Investors that have committed to the $200mn PIPE round include Sequoia Capital, Tiger Global, and Mubadala Capital.
  • As part of the merger terms, Embark is getting a new board member in Elaine Chao, the former US Secretary of Transportation under Donald Trump and before that a former US Secretary of Labor. 

We just gave you the SPAC deal terms above. Now, let's talk a bit about Embark's business and background.

  • Embark is a startup that's been in existence for just five years. It's an alum of the famous startup incubator Y Combinator.
  • Among a handful of automated trucking startups out there, Embark stands out with its business model. It's offering its self-driving software on a pay-per-mile subscription basis to truck fleet operators. It's possible because the software is built to work with hardware directly from truck manufacturers, "platform agnostic" as it's called.
  • Embark is currently in its research & development phase and doesn't expect to start making money until 2024. At that, we think the $5.2bn valuation for the company is quite over-the-top.
  • With the uncurbed projections that we've come to normalize with SPAC deals, Embark projects that it'll bring in $900mn in annual sales by 2024 and, wait for it, $2.8bn by 2025 (RemindMe! anyone).
  • With the proceeds from its SPAC merger, Embark says it'll spend 70% of it on expanding its headcount and smaller percentages on on-road testing and strategic manufacturing.
  • Who gets rich from the SPAC merger? They include co-founders Alex Rodrigues and Brandon Moak, incubator Y Combinator, and VC firms Sequoia Capital and Tiger Global. Embark has raised $117mn in venture funding over the years.
Upon completing its merger, Embark will start trading on the New York Stock Exchange. The merger is expected to be completed in the second half of this year.

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