Matt’s Top 3 SPAC Targets – Advanced Materials

Matt’s Top 3 SPAC Targets – Advanced Materials

SPACInsider contributor Matt Cianci this week compiled his three favorite potential SPAC targets producing new-age sustainable materials. We look at why they are compelling and why each could be a fit for a blank-check merger.


Early in the SPAC surge that began last summer, Fortress Value Acquisition Corp. announced its combination with rare earth miner MP Materials (NYSE:MP). It immediately became one of the deals in early in the surge that turned heads, although SPACs had targeted mining and other extractive industries before with mixed results.

Gold and silver-miner Hycroft (NASDAQ:HYMC) continues to trade below $10 after combining with Mudrick I in June and oil-and-gas driller Alta Mesa declared bankruptcy a year after its 2018 combination with Silver Run II.

But MP Materials was a deal the market loved – and still does, closing at $43.53 Thursday, having completed the transaction in November.

A big difference between these deals was the two less successful combinations involved the commodities that have powered our past and present but MP Materials was mining the stuff of the future. Its holds rights to some of the largest deposits outside of China for the rare materials critical for making wind turbines, electric vehicle (EV) batteries, robotics and other cutting-edge technologies.

For investors looking for a pure play to invest in the upstream of sustainable energy and high tech, there was suddenly a stock for them.

These rare earth deposits are by their very nature rare, but, much of the stuff of the future is being created, not extracted. As sustainability goals force companies to find the right stuff to make their products and packaging that don’t pollute, much more investment into the makers of advanced materials is needed and SPACs are already jumping in.

The market still digs Roth CH’s (NASDAQ:ROCH) November-announced deal to combine with sustainable plastics-maker PureCycle, with the SPAC closing at $24.60 Thursday. Three other SPACs have also been drawn in with Artius (NASDAQ:AACQ), Peridot (NYSE:PDAC) and the trend-setting Gores team (NASDAQ:GRSV) each announcing deals this month with manufacturers of recycled or carbon-negative materials.

CarbonCure Technologies

Much of the debate around the environment has centered on the stuff that makes the packaging consumers ball up and throw away only to lie undegraded for generations. But, one of the largest polluting culprits is something that we humans actually want to last – concrete.

Eight billion tons of plastic have produced over the past 60 years, but the cement industry pumps out that weight every two years, and producing it creates 4% to 8% of the world’s carbon emissions. If the cement industry were a country, it would the third largest CO2 emitter in the world.

While there may be no way of putting the whole emissions genie back into the concrete bottle, CarbonCure has found a way of trapping what CO2 is left within the concrete that is made. It injects additives into wet concrete that mineralize CO2 into a solid that strengthens the material and keeps the CO2 within, even if that concrete is destroyed or demolished.

CarbonCure produces its own concrete this way and licenses the technology on a monthly basis to about 300 other producers. It estimates that every cubic yard of its concrete that is poured eliminates 25 lbs of CO2 that would otherwise be released into the atmosphere.

Thus far, the Canada-based company appears to have not tugged on the strings of outside capital much for its growth, raising a total of $12.4 million in publicly disclosed rounds since 2011.

But, CarbonCure has also raised the ante for itself with a target of reducing CO2 through concrete by 500 million tons annually by 2030. Its past two rounds in September and January did not disclose proceeds but included several new deep-pocketed investors such as Mitsubishi (TY:8058), Microsoft and Amazon’s Climate Pledge Fund.

It has also thus far primarily focused on the North American market, but a SPAC transaction could help facilitate a wider global launch and potentially a business model shift that brought more of the concrete-making under its roof rather than through licenses.


Calysta

In a similar vein, agriculture generates 26% of the global greenhouse gas emissions, much of which comes from activities that are difficult to avoid. But, Calysta is among the companies mitigating the damage by crafting sustainable inputs for that industry.

It has jumped to the very beginning of our food chain to create a sustainable fish and livestock feed created entirely from fermenting natural gas with naturally-occurring bacteria.

Unlike CarbonCure, Calysta has long been active in the private capital markets, raising $129.2 million through nine rounds and includes strategic investors BP (NYSE:BP) and Cargill among its backers.

Last month, it announced a joint venture in China with Adisseo (SHA:600299) to build a feedstock plant in the Chongqing expected to be the first commercial-scale facility of its kind.

Among the benefits of Calysta’s technology is it requires no agricultural land and uses almost no water to produce its feed. Meanwhile, agriculture has claimed about 50% of total habitable land in the world and accounts for 70% of all freshwater use.

Those strains don’t show any sign of lessening and demand for animal-based food is expected to outpace that of broader food demand. It is estimated that producers will have to increase the output of meat and milk by 25% per hectare by 2050, and part of that comes from not using more land to feed the animals themselves.

While Calysta is likely on the radar of all 18 SPACs currently searching for targets in sustainability, it seems like a particularly good fit for Natural Order Acquisition Corporation, (NASDAQ:NOAC) which specifically seeking a target “disrupting the animal-based protein and food industry.”


Hazel Technologies

Hazel replaces something that doesn’t get thought of much: those little sachets of silica gel that we are famously extorted not to eat. While silica gel absorbs moisture to prevent damage to consumer goods, Hazel has developed sachets that do something like the opposite for fresh produce.

Its sachets and packaging release vapor that helps form contained atmospheres that extend the life of produce by as much as three times. These vapors prevent mold and also slow the effects of the of ethylene, which is the hormone that fruits and vegetables release to ripen and then eventually spoil.

This is a big issue for food sustainability as over 30% of produce harvested is never consumed, instead turning to wastage on grocery store counters or in the supply chain along the way.

Much of the company’s early developmental work was funded by the USDA, but the company nonetheless did outside funding rounds in each year from 2017 to 2019. Its $13 million raise in 2019 was its last such move, however, and was intended to bridge the company to profitability.

Hazel’s products may start in the middle of the value chain, but they do end up on shelves and therefore could potentially attract the attention of the 12 SPACs searching in the consumer space. Given that it is a slightly earlier target, Hazel could also be a fit for Gladstone Acquisition Corporation (NASDAQ:GLEEU) which has filed for an $100 million IPO with the intent of combining with a target supporting the farming industry broadly.