SPACs In Clean Energy — Not Always A Shell Game

These past weeks have been a perfect storm for the clean energy industry. The cyberhack of the Colonial Pipeline shut down gas stations from Houston to New Jersey, highlighting how fragile our digital infrastructure really is. Not even a week later, Ford announced that their best-selling F-150 pickup truck would be available as an electric vehicle (EV), the Lightning, in the spring of 2022. Without geeking out on a truck, here are a few stats on this version of the best-selling car vehicle in the US for 39 years. The estimated range between charges? 300 miles. Zero to 60? Faster than the F-150s on the road now. Price? Under $40,000 after federal tax rebates.

Okay, enough about the Lightning. My point is that the gasoline-powered combustion engine is not dead yet, but it’s heading towards life support. GMC, Tesla, and Rivian are also bringing EV trucks to market in the next year.

I said before in this series on SPACs that there are some good deals to be found in the energy sector and that I’d focus on the most successful ones, as well as why, in my opinion, they’ve worked on all levels. As I have also said about SPACs in clean energy, the finite lifespan of a SPAC and the boom in energy investing gives startups in the industry a bit of an advantage over other sectors and the SPAC sponsors.

To recap:

  • The default percentage a SPAC takes is 25%.
  • Shares are ten bucks.
  • Early investors get a ‘buy one share, get one option free’ offer.
  • Then they can sell the shares (again, ten bucks), recoup their investment, and still have the options.

In a nutshell, this investment version of Vegas in the thirties is why I am so vehemently opposed to SPACs. But there are exceptions to every rule — especially when I’m making the rules — and I do see opportunity in some SPACs in clean energy.

How SPACs in Clean Energy Can Work

It doesn’t matter if you’re trying to get your parents to fund a lemonade stand or you’re taking a billion-dollar IPO on a cross-country roadshow; you’ve got to show some sort of profit plan. Suppose your last lemonade stand cost your parents $20 and you made $22, less their additional investment of $2 because the parents have to support your business. In that case, you can make the argument that, since there are three new families in the neighborhood with eight kids among them, you can drive up sales from a greater investment pool. It’s a winning strategy. After all, no decent adult bypasses a lemonade stand, and these days the kids probably take Venmo. Also, you have past performance data to build your case.

Clean energy startups don’t have the luxury of your kids and their summer business. There is no past performance in this sector. It’s all new and future-driven. This makes IPOs an even steeper hill to climb for an energy entrepreneur. Without historical financial information, there’s not a whole lot to offer investors that will give them any idea of your prospects. The positive margins that a potato-chip company can show just aren’t there with a brand-new technology that’s yet to be market-tested. The bottom line? Energy startups have no way to produce forward-looking numbers because the IPO process doesn’t allow it.

Enter the SPAC

A SPAC is already a public company. So they can produce their own sparkling balance sheet (with no expenses and money always crashing in, it had better be sparkling) to shareholders ahead of a proposed merger with a target. The SPAC can project all kinds of wild numbers with wide-eyed honesty, and it’s all perfectly legal. Now, in most cases, this is a bad thing, and individual investors lose their shirts. But with some of the well-run and experienced SPACs in clean energy, they have institutional knowledge of the industry to back up the projections.

It is a fact that energy is transitioning to cleaner platforms. Smart SPACs can legitimately project robust earnings for a battery or hydrogen company — and trust me, Ford did not need outside investors to build and market the Lightning — that already has the fundamentals to scale up and just lack the track record for growth.

…Enter the SEC

But Wall Street is all about “proper’ valuations. The SEC has made it pretty clear that they do not look kindly on ambitious SPAC projections with no solid backing. The recent closing of the safe harbor gates speaks to that. The problem is that the SEC is a lot like Congress and about ten years behind in managing the warp-speed world of technology in the startup sphere. This makes an IPO an uphill climb for most entrepreneurs.

How do you get to positive growth when you’re hamstrung by antiquated rules for raising money? Cleantech is the future. At some point, the SEC will have to address that with some specific regulation that appreciates the future more than the past. We may all live so long. Anyway, the outlook is pretty good for companies merging with SPACs in clean energy. In 2020, there were several worth mentioning. Nikola, Quantumscape, EOS, and Luminar are some of the bright spots on the landscape. 2021 has more strong deals in the pipeline. The driving factors in these successes were the readiness to scale and innovative technologies with a solid marketing plan.

Basic SPAC Due Diligence

SPACs and cleantech ventures can pair well together in otherwise treacherous territory.

So you’re determined to invest in a SPAC or are open to the idea of merging your brilliant startup with one. How do you know which ones are worth your time and money? Here’s what I look for in any investment team.


Look for a SPAC with a management team and board who have been around the clean energy space. They should also have good track records for investments. Independent directors are key. SPAC directors are like any other in that they have a fiduciary responsibility to shareholders (that is, the duty of care). They are liable if they neglect that duty.


I don’t think I’ve spent much time on PIPEs, or private investment in public equity, but now’s a good time. A PIPE is when an institutional investor buys into a company directly and below market price. The regulatory requirements aren’t as strict as IPOs, but a PIPE is not a targeting company like a SPAC. PIPE investments really should give peace of mind to individual investors. When pension funds, insurance companies, and sovereign wealth funds buy into a SPAC, you can be sure they have done due diligence at a level you can only dream about. Also, the SPAC can share data with them that they can’t disclose to the public. In return, the investors agree not to trade the stock for a prescribed period.

If there is a gold standard in SPAC-land, PIPE money would be it.

SPACs in clean energy are outgrowing some of their earlier problems. More credible managers and BODs are coming onto the scene. And as I have said ad infinitum, cleantech is such a booming business that everybody wants in on the action as quickly as possible. The sponsor teams are high-quality investors, the money raised and how it’s managed are more mainstream thanks to PIPEs, and there is as much to embrace as to avoid.

CLII and EVgo

There is sort of a dream team in the SPAC/cleantech universe. The company, Climate Change Crisis Real Impact I Acquisition Corporation — CLII, to make life easier — was co-founded by three serious heavyweights:

  1. Beth Comstock, the Vice Chairman of GE who oversaw their green technologies merge under the Ventures and Ecoimagination umbrella
  2. John Cavalier, head of the energy group and Vice-Chair of Investment Banking at Credit Suisse
  3. David Crane, CEO of NRG, a leading energy company

CLII announced in January that it would be merging with EVgo, the EV charging station company. EVgo is a public network, unlike Tesla, and it’s the first EV charging company to run solely on renewable energy.

EVgo’s value in the deal was initially $2.63 billion, and it is targeted to close sometime this quarter. The pro forma enterprise value is $2.06 billion (there’s that 25% pound of flesh), which is still well into unicorn territory. EVgo will see net cash proceeds of $575 million from PIPE funds to finance their growth initiatives. That money is pooled at $400 million, $10 per share and an additional $230 million that CLIII has in cash in a trust account.

How Clean Energy Policies Fit In

There’s some government incentive on the horizon to sweeten the deal. CLII stock jumped 10% when the Biden administration announced the $2.3 trillion infrastructure plan, with significant investments — $174 billion — in clean technologies. The administration is targeting 500,000 charging stations up and running by 2030. This makes the EVgo/CLII deal a winner across the board. EVgo’s CEO, Cathy Zoi, said today that the activity on their network has slid back up to pre-pandemic levels. In fact, she said the “electrification of transportation is continuing apace.”

There are more deals with SPACs in clean energy that are worth a closer look. I’ll be going over some of those in the next installment. I’ve about convinced myself to invest in an energy SPAC, so excuse me while I go do some research.

This article was originally published June 3, 2021 on KirkCoburn.

Kirk Coburn

I am an active investor into entrepreneurs solving the world's climate & energy problems, energy entrepreneur, start-up advocate, outside(r), surfer, and ordinary athlete.

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