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Why Spring Valley Acquistion Stock Jumped Today

By Jeremy Bowman – Oct 14, 2021 at 3:42PM

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The breakup of its merger with AeroFarms had a surprising result.

What happened

Shares of Spring Valley Acquisition (SV) were climbing today after the special purpose acquisition company (SPAC) announced that its merger with vertical farming company AeroFarms was being terminated.

The news came after the initial merger was announced seven months ago, and Spring Valley is now free to pursue another privately held company.

As of 2:07 p.m. EDT, the stock was up 10.5% to $9.93, trading near the $10 mark, which is the nominal price of most SPACs.

A view from above of a vertical farm and an employee standing beside rows of plants.

Image source: Getty Images.

So what

Investors seemed to sour on the deal back in August when the stock fell below $9, well off its $10 nominal price, indicating that investors believed the company would be worth less after a merger.

Several factors seemed to contribute to that perception. First, there were multiple delays in executing the merger, possibly due to regulatory challenges or potential reservations from one or both parties. Second, AppHarvest (APPH -0.48%), the only publicly traded pure-play vertical farming stock, has lost 83% year to date as hopes for growth in the emerging industry are running into reality.

An Aug. 16 business update from AeroFarms also seemed to rattle investors. The update came following a disappointing earnings report from AppHarvest. In a statement, AeroFarms CEO David Rosenberg said,

We made this decision to ensure that AeroFarms is in an optimal position to pursue our growth strategy and to deliver on our mission to grow the best plants possible for the betterment of humanity. We believe proceeding with this transaction is not in the best interests of our shareholders.

Now what

It's back to square one for Spring Valley with the breakup of the merger agreement. Though the stock gained on the news today, it's hard to see this as a positive for the SPAC as investors essentially wasted months waiting for a deal to go through that ultimately failed. Spring Valley said it would focus on finding another target to acquire before its dissolution deadline next May.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends AppHarvest, Inc. The Motley Fool has a disclosure policy.

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