What’s the Deal with SPACs? Li-Cycle Completes Merger with Peridot on Eve of IPO

Prior to the merger, Li-Cycle was valued at $975 million in a pre-money equity valuation. The proceeds bump its pro format equity value to $1.55 billion. The transaction will inject $580 million of gross cash proceeds to Li-Cycle, which the company will use to advance its battery resource technology for lithium-ion batteries globally. Part of that figure is a $315 million fully-committed, upsized common stock private investment in public equity (PIPE) at $10.00 per share from investors, mainly Neuberger Berman Funds, Franklin Templeton and Mubadala Capital, as well as Peridot sponsor Carnelian Energy Capital and existing Li-Cycle investors including Moore Strategic Ventures and Traxys.

Speaking about the deal, Alan Levande, the former chairman and Peridot CEO and now a non-executive director Li-Cycle’s board, said that  “Li-Cycle’s innovative business model, exceptional management team, and proven, disruptive technology provides the company with a strong competitive moat that is poised to benefit from global electrification. Since announcing the transaction, the Li-Cycle team has demonstrated excellent stewardship – announcing foundational commercial agreements, bolstering the leadership team with strategic hires, strengthening the Company’s IP, and importantly, furthering progress on building out the Company’s Spoke and Hub model. We are excited to see its future successes amplified in the public markets.”

Li-Cycle’s existing senior management team remains intact: Ajay Kochhar, Tim Johnston, Bruce MacInnis (Chief Financial Officer), Kunal Phalpher (Chief Commercial Officer), and Chris Biederman (Chief Technology Officer).

Wall street analysts have identified the use of SPACs, also known as “blank check companies” as a hot trend. A set of investors creates a shell corporation with the intent of going public via share exchange, asset acquisition, share purchase, reorganization or other merger. Once a suitable partner surfaces with which to merge, that company receives a boost in capital and the ability to be publicly traded while investors receive a boost in equity. PIPE is a pre-acquisition fundraising round that allows a select group of accredited investors to purchase securities prior to the close of the transaction, essentially making the deal more favorable.

In November 2020, PureCycle announced a merger with SPAC Roth CH Acquisition I . The deal closed in March 2021, allowing the plastics recycler to IPO in the Nasdaq Stock Market (NASDAQ) under the ticker symbol PCT.

PureCycle’s patented technology, licensed from Proctor & Gamble, recycles waste polypropylene to a virgin-like resin for use in high-grade consumer products.

The company’s CFO Michael Dee stated that PureCycle raised more than $730 million over the past year, “extraordinary group of highly sophisticated investors”  in a variety of financial transactions. The acquired capital will allow the company to expand and increase its corporate development.

Nikola, the electric vehicle maker which recently made headlines following the indictment of its founder for allegedly defrauding investors, also successfully pursued an IPO with the assistance of a SPAC. Before the transition with SPAC VectoIQ Acquisition Corp., the company was valued $3.3 billion. Nikola raised more than $700 million between the merger and PIPE, which included Fidelity Management & Research Company, ValueAct Spring Fund and P. Schoenfeld Asset Management LP.