SPACInsider contributors Anthony Sozzi and Sam Beattie this week compiled their three favorite potential SPAC targets among companies making sustainable consumer products or materials. We look at why they are compelling and why each could be a fit for a blank-check merger.

It’s difficult to judge virtually any sector based on price performance in the snapshot of the current market regardless of what path they took to listing. The best one can say in such time is how well everything is doing relative to everything else.

From that perspective, one of the bright spots among de-SPACs are sustainable consumer materials companies. The four such companies that have fully de-SPAC’d since 2019 – PACK, DNMR, PCT and ORGN – now trade at an average price of $8.42 while the average price of all companies that de-SPAC’d over that time was $6.01 at Thursday’s close.

Consumer services companies that hit the market via IPO over this period have median returns of -38.1%, mirroring SPACs overall, while consumer goods companies that IPO’d have fared slightly worse at -46.1% median returns.

It should perhaps not come to a major surprise that sustainable consumer de-SPACs have risen above the noise given that this category of companies bridge consumer staples, which people are going buy no matter what, and sustainability, which is going to soak up a portion of the ESG investment that has to go somewhere.

This cohort is also about to be joined by three more who have announced deals with SPACs that have not yet closed. Two of these – Footprint, which has a pending merger with Gores VIII (NASDAQ:GIIX), and LanzaTech, which is merging with AMCI II (NASDAQ:AMCI) – work on the industrial side to create sustainable packaging or the inputs for sustainable materials.

Grove Collective, which is combining with Virgin Group II (NYSE:VGII), sells sustainable and plastic-free products through an ecommerce and subscription box model.

Bolt Threads

Bolt Threads is closer to the former of these two models as it provides sustainable fabrics and other materials to the textile and cosmetics industries.

Its Mylo leather alternative is created by materials derived from mushroom roots and has been incorporated into products from brands Stella McCartney, adidas (DE:ADS) and lululemon (NASDAQ:LULU).

Emeryville, California-based Bolt Threads has also used bio-fermentation to create Microsilk, its sustainable silk alternative that is made from the same proteins found in spider webs and is fully biodegradable. It has used this same protein to produce both partnered products in the form of shampoos and conditioners via the vegan beauty brand Vegamour and also its proprietary cosmetic brand Eighteen B.

Eighteen B was launched in 2019 and later discontinued as Bolt likely realized a business model that fully insulated it from the retail-side grunt work was more streamlined and lucrative. With that as its focus, it has already achieved unicorn status with $467 million in outside funding raised to date.

The most recent of these raises was a $140 million Series E announced not so long ago in September 2021, but that doesn’t mean that it couldn’t use more logs on the fire. Bolt Threads saw many of its business lines break out into commercialization in 2021. But, their applications thus far – such as in the upholstery of Mercedes-Benz’s (DE:MBG) EQXX concept car – are largely bespoke and still far from the mass market.

While there are 23 SPACs currently specifically searching for sustainability targets, Bolt Threads’ best SPAC partner might be bleuacacia (NASDAQ:BLEU), which raised $276 million in its November 2021 IPO. While the fact that its units contained a one-half warrant and right to a 1/16 share may have turned off some targets in the November market, these are far from bad terms, particularly without an overfunded trust, in the market today.

What’s more, bleuacacia is led by Co-Chairmen and Co-CEOs Jide Zeitlin and Lew Frankfort. Both are former chairmen and CEOs of Tapestry.com, the parent company of Coach, Kate Spade and Stuart Weitzman brands, and would therefore bring immediate customer synergies.

Pulpex

Pulpex, as it were, already has strategic synergy in spades, but could be at that inflection point for both growth and liquidity that would benefit all sides.

It was initially established as a joint venture between alcoholic beverage producer and distributor Diageo (NYSE:DEO) and Pilot Lite Ventures in 2020, with the latter holding slightly over a 50% stake. Pilot Lite’s approach is to launch ventures around valuable patents or IP stranded within larger companies.

In this case, it is partnering with Diageo to develop its patents around the production of paper bottles. While much of the packaging space has gradually seen recycled paper-based products come to the fore, glass and aluminum containers face a mostly unchanged landscape. This is in part because both of these materials can already be efficiently recycled. But, those recycling methods require high heat and often come with their own emissions or energy consumption liabilities from a sustainability standpoint.

Pulpex’s bottles are made from 100% renewable forest feed stocks and are streetside recyclable with a 90% lower carbon footprint than glass. At the moment, this option is still more expensive than glass bottles and has other limitations. But as it continues to develop the technology, it predicts that these bottles will soon be able to handle carbonated and hot products as well as cold, still ones.

PepsiCo (NASDAQ:PEP), Castrol, GSK (NYSE:GSK), and Estee Lauder (NYSE:EL) have each joined in the development process for the packaging for their own products and Unilever (NYSE:UL) has already presented prototypes.

And, while the current market climate may not be hot on companies that are pre-commercialization, Pulpex already has perhaps one of the most powerful possible strategic partners through its nearly-50% owner in Diageo with its $115 billion market cap and wide portfolio of alcohol brands like Crown Royal, Smirnoff and Captain Morgan.

As it develops, Pulpex will likely be more valuable to both Diageo and Pilot Lite as a pure sustainability play in a spinoff, which would itself be rendered cheaper and potentially contain higher seller upside in a SPAC deal.

Rothy’s

Speaking of companies that may not see regular-way IPOs in the brightest of light, Rothy’s has watched perhaps its nearest peer Allbirds (NASDAQ:BIRD) steadily fall -74% since its November 3, 2021 IPO.

San Francisco-based Rothy’s makes footwear and accessories for both men and women knitted from recycled plastic bottles. The resulting products are themselves machine-washable and recyclable themselves.

Other materials going into its shoes’ rubber soles and insoles are made from algae harvested from waterways, as well as elements drawn from castor beans, hemp fiber, sand, and recycled cardboard packaging.

Rothy’s production takes place overseas, but it owns the China factory where it claims its knitting techniques produce 30% less wasted material than competing techniques. Its D2C channel also makes up 98% of its total sales.

These are all points of similarity with Allbirds and rather than endure the rude awakening it experienced following its IPO, Rothy’s can now use its present valuation to price a SPAC deal while locking in an earn-out to capture the upside when the market returns. Due to its slump, Allbirds now trades at about 1.6x its current revenue while other listed peers Ralph Lauren (NYSE:RL) and Chico’s (NYSE:CHS) trade at 1.3x and 0.6x, respectively.