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As the SPAC boom wanes, one set of companies is still using these lightly regulated backdoor paths to a public listing for a new reason: They’re hoping to make the US government a shareholder.
Of the 25 companies that announced plans this year to go public by merging with a listed, blank-check vehicle, eight are critical materials and nuclear energy companies, according to data from S&P.
Many are hoping that going public will attract the attention of the Trump administration, which has funneled federal money into listed companies seen as crucial to winning strategic battles with China over access to critical supplies and technologies, said Brandon Sun, head of SPACs at investment bank Cohen & Company Capital Markets.
Last year, before President Donald Trump took office, those categories made up just seven of the 67 companies that announced plans for a SPAC merger. SPACs are more lightly regulated than traditional IPOs and allow executives to use rosy financial projections, which has contributed to their declining popularity after a string of companies including WeWork and Lordstown Motors filed for bankruptcy after listing via SPACs.
A White House seal of approval has led to share-price spikes at several companies, including MP Materials and Trilogy Metals. “The public sector support for these deals has always been there, but in the last few months, it’s really accelerated,” Sun said.
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Most critical materials companies are in touch with the Trump administration about getting funding, and going public is an advantage that sets certain companies apart, Sun said. They benefit from credibility and more access to capital, and the government likes the transparency and accountability that comes with public listings.
Companies that have filed their plans to merge with a SPAC in the last year include California-based Deep Fission, which is looking to place small modular nuclear reactors deep underground; Canada’s RZOLV Technologies Inc., whose technology helps remove critical minerals from mines; and Canada’s Eastport Critical Metals Corp., which looks for mineral deposits.
Since Trump took office, the Departments of Energy, Commerce, and Defense have provided $4.6 billion in equity investments and loans to four critical materials and one nuclear company. And they haven’t limited the funding to US firms — two of those companies are based in Canada and one in Australia. Four of those five companies have seen their stocks increase in the last year.
Rachyl’s view
The US government’s growing role in the economy has already spilled widely into the public markets, as the most valuable company in the world, Nvidia, sees its stock rise and fall on Department of Commerce announcements about export controls.
But the SPAC boomlet hints at something else: Companies that are otherwise not ready or valuable enough to face public markets can persuade promoters and investors to bet on decisions made in Washington about taxpayer dollars.
Notable
- Venture capitalists are also betting on the national strategy around bolstering the US’ critical materials sector. Boston-based Allonnia, which develops mineral extraction technology, raised more than $20 million this month, bringing its funding to more than $100 million.