AppHarvest (NASDAQ:APPH) hasn't had an easy time of it during the coronavirus pandemic, and shares of the company have plunged by double digits since its initial public offering in 2021. In this segment of Backstage Pass, recorded on Dec. 13, 2021, Fool contributor Jason Hall explains what investors should know about AppHarvest's business model and market potential.

Jason Hall: This is a name that should be familiar to Fools that have been around for the past year in any of the newer services, because it's actually one that was recommended as a sale in a good number of services. The real money portfolios, the Fool actually sold quite some time ago it's AppHarvest. AppHarvest went public via SPAC.

In February, there was massive anticipation. The deal has been announced before that and the shares of the blank check company that became AppHarvest were up enormously before it went public. There's a lot of those initial expectations at $30 a share versus the usual $10 a share for a lot of SPACs that we saw. As you see, it's come down 86%. Let's talk about the business and the opportunity first.

They see the opportunity for between about 17,000 and 20,000 acres of potential farming, generally producing fresh produce. Things like tomatoes and cucumbers and leafy greens, bell peppers, those sorts of things. Those fresh produce that's really popular in grocery stores with American consumers.

Demand for those things in the U.S. has grown much faster than farming capacity and it's at a point now where over the past 12 years or so, where specifically tomatoes and cucumbers and bell peppers were the majority of those were produced outside of U.S. Now Mexico produces a tremendous amount of those.

The couple of things that the company sees as opportunities from that as demand increases in more exports happen the supply chain distances increase pressures on getting supply to market still fresh. 

Then you have carbon footprint. Every extra mile you have to move those goods there's additional diesel, that's consumed or fuel oil. Or in the best case natural gas, you think about transportation, the carbon footprint it's a big issue. So yeah, freshness, you have access to the market, and you have the global climate impact of the carbon.

The high-tech greenhouses that they're building and developing can yield about 30 times acre per acre versus open field growing. You have predictability and control over all of your inputs, the amount of lights you need, the amount of nutrients, the amount of water. Your ability to really maximize and scale is very high.

The name AppHarvest is not because of an app, it's Appalachia. It's based in Kentucky, coal country is really where it is. It's an area of the country that has really been economically left behind for really pretty much since the beginning of the existence of the United States.

It's never really been economically on par with a lot of parts of the country in the coal industry obviously just died and that's been just the latest struggle. They are really focused on building in that area. Two reasons beyond the economic opportunity for the people in those communities are water.

This is one of the 20 rainiest states, so they have access to water, which is hugely important. They control the other inputs, but they still need water to be able to get there, so there's plenty of groundwater from lots of precipitation and also logistics. It is a wonderful place to be.

You think about Memphis, for example, Louisville, Kentucky. You get up toward Cincinnati, which is right on the Ohio, Kentucky border. All of the large shipping companies, UPS, FedEx, DHL, they all operate major transportation hubs in those areas which were within a few hours of where AppHarvest's operations are going to be based.

You're closer to customers, they say within a one-day drive of 70% of the U.S. population, that's basically everything except for the West Coast. That's enormous access to those markets.

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