Shares of 10X Capital Venture Acquisition (VCVC) were sharply higher on Wednesday, after the special-purpose acquisition company (SPAC) announced that it will merge with electric-vehicle platform maker REE Automotive.
As of 3 p.m. EST, 10X Capital's stock was up about 43.8% from Tuesday's closing price.
REE Automotive has developed a series of electric-vehicle "platforms" that can serve as the underpinnings of many different types of vehicles. In industry-speak, REE's products are flat EV "skateboards" that are modular, meaning that the components can be arranged to support vehicles of many different shapes and sizes.
The idea is that with REE's platforms, commercial-fleet customers can create electric vehicles tailored to their needs at reasonable cost and with a low total cost of ownership.
Here are the highlights of the merger deal announced on Wednesday:
- 10X Capital brings about $200 million in cash to the deal.
- The post-merger company will receive an additional $300 million via a fully committed "PIPE" (private investment in public capital). The PIPE's investors include prominent auto-industry supplier Magna International (MGA -1.04%) and Indian truck manufacturer Mahindra and Mahindra (MAHMF -0.26%). The PIPE was "oversubscribed," 10X said, meaning that there was more investor interest than it could accommodate.
- The deal values the post-merger company at $3.6 billion.
REE expects to begin mass production of its platforms in 2023, and to generate revenue of $19.1 billion by 2026. Its order book has "indications of interest" for over 250,000 of its platforms, it said, representing 27% of that expected revenue.
Auto investors know that electric-vehicle stocks have been white-hot for months. That's why this SPAC's shares surged after the deal with REE was announced on Wednesday.
If all goes according to plan, the merger is expected to close by the end of June.