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What Should Warehouse Investors Know About This Robotics SPAC?

Feb 25, 2021 by Matthew DiLallo
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Robotics company Berkshire Grey is the latest private company going public through a deal with a special purpose acquisition company (SPAC). It agreed to a transaction with Revolution Acceleration Acquisition Corp (NASDAQ: RAAC) to infuse it with cash and accelerate its expansion. The company has a significant growth opportunity ahead by providing solutions that automate warehouse and logistics fulfillment centers.

Big-time backers

Berkshire Grey, founded in 2013 by the former chief technology officer of leading home robotics company iRobot (NASDAQ: IRBT), develops integrated artificial intelligence (AI) and robotics solutions for e-commerce, retail replenishment, and logistics. The company's software and hardware automate the business operations of industrial real estate like warehouses and logistics fulfillment centers. Its products help retailers and logistics companies support the explosive growth of e-commerce.

Berkshire Grey's existing shareholders include well-known technology investors Khosla Ventures, New Enterprise Associates, Canaan Partners, and SoftBank Group, which are all rolling 100% of their equity in the combination with RAAC. Meanwhile, the company is bringing aboard several additional big-name investors via its SPAC deal, which includes a fully committed PIPE (private investing in public equity), anchored by Chamath Palihapitiya, founder and CEO of Social Capital, Hedosophia, and funds and accounts managed by BlackRock (NYSE: BLK).

In addition to bringing those new investors aboard, the SPAC deal will provide Berkshire Grey with $413 million in cash, which includes $165 million from the PIPE, boosting its cash position to $507 million. The transaction values the robotics company at $2.7 billion in equity, and it has no debt. As a result, it has a significant amount of financial flexibility to support its operations and capitalize on new and existing growth initiatives.

A massive opportunity set

Berkshire Grey provides retailers and logistics operators with robots, sensing systems, gripping systems, and machine vision systems to automate their warehouses and fulfillment centers. Companies that utilize its AI-enabled software and hardware solutions improve their operational efficiency to such an extent that most yield a return on their investment in as little as two to three years. Because of that, it has been growing at a brisk pace.

However, it still has a lot of room to run. The company estimates that only about 5% of warehouses are automated today. Meanwhile, the industrial real estate industry is building more of them each day. According to an estimate by leading industrial REIT Prologis (NYSE: PLD), e-commerce companies require 1.2 million square feet of distribution space for every $1 billion in sales. With online sales expected to grow at a brisk pace in the coming years, the U.S. alone could add as much as 1 billion additional feet of warehouse space by 2025, which is like replicating Prologis' entire global footprint in a few short years.

Berkshire Grey already has a strong order backlog and is in ongoing negotiations with multinational retail, e-commerce, and package logistics companies, giving it highly visible projected revenue through 2022. Meanwhile, it's growing its support operations to meet the increasing demand for its services and build new solutions to add additional value to its existing and future customers.

Bringing warehouses into the future

Berkshire Grey's robotics solutions are automating warehouses and fulfillment centers, enabling retailers and e-commerce companies to operate more efficiently and reducing their costs. That benefit is flowing down to the consumer via lower costs, faster shipping, and better selections, further accelerating the shift to shopping online. That will likely drive the need for even more warehouses in the future, which will benefit real estate investors focused on this sector.

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