This article was originally published on August 25, when the teaser ads were initially running — but they ran heavily again recently with a “you have to get in by September 29 before the secret gets out” pitch, so most of what follows is the same as when I first covered the pitch… but I’ve added some updates here and there.
This pitch is a little bit of a follow-on to the still oft-requested “TaaS” piece by Whitney Tilson — Tilson began teasing his “Transportation as a Service” idea for his Empire Stock Investor newsletter, and some stocks that play on that, in “presentations” that primarily recommended Waymo (a division of Alphabet (GOOG)), Aptiv (APTV) and NVIDIA (NVDA) starting about four months ago, and the ad is still being pretty heavily distributed (my article about that pitch is here, if you missed it the first time around), but recently Tilson’s colleague Enrique Abeyta was hinting at another play on the “autonomous vehicle” technology that will make TaaS possible.
This tease I saw first was dated August 20, and it’s in ads for Abeyta’s Empire Elite Growth newsletter ($2,000 for first year, renews at $3,000/yr), one of the “upgrade” offerings of Tilson/Stansberry’s Empire Financial group (direct marketing publishers are like sharks… if they stop “upgrading” you, they die)… and the pitch is no doubt exciting some folks because it combines three hot “themes”: electric cars, IPOs, and autonomous vehicles.
This is how the tease gets rolling:
“You can think of LIDAR as the ‘eyes’ of an autonomous vehicle.
“These ‘eyes’ are going to be some of the most valuable pieces of technology of the century.
“Even after the roads are packed with self-driving cars, all using the same “eyes,” it’ll be just the beginning for LIDAR technology.
“Any dynamic vehicle and robot will need to have LIDAR to react to the world around it.
“That’s why my recommendation for you today is one of the top LIDAR suppliers in the world.”
Lidar is a remote sensing technology, sort of like radar but using light instead of sound, and it is being used by most of the autonomous vehicle developers, often in combination with radar and camera sensing technologies — it has limitations, and Tesla hasn’t been using it in its own autonomous technology (Musk got a huge amount of attention last year for saying “Anyone relying on lidar is doomed”), but almost everyone else uses it… with the expectation that the costs, which are still far too high to include in production cars (probably why Tesla isn’t using it… yet), will come down dramatically over time.
There are a bunch of companies that sell lidar sensors and systems, and many more coming up through the startup ranks as they try to reduce the costs of lidar for the perceived huge market that will emerge, so which one is Abeyta talking about? We do get some clues, thankfully…
“This company is already working with brand-name companies like Ford, Baidu, Hyundai Motors, and Nikon….
“This company already has more than 300 customers and has generated more than $500 million in revenue over the last decade.
“Most of that has come from technologies outside autonomous vehicles….”
OK, so it’s not one of the brand-new startups. What else? Apparently it’s a leader in the business in some meaningful way… Abeyta says:
“It also has a ton of healthy advantages versus its competition: it’s a first mover, has dominant market share, and a moat of patents and repeat customers to dominate the field for years to come.”
And their own management, we’re told, is projecting 60% annual revenue growth for the next four years.
And then we get to the “IPO” bit…
“This company quietly went public just last month… And yet there wasn’t more than a peep from the financial media.
“That’s because it decided not to IPO with all the fanfare – and pressure – that comes with it.
“Instead, it went public via a little-known ‘reverse merger.'”
Ah, so it’s probably part of the SPAC conversion mania… Special Purpose Acquisition Corporations, often called “blank check” companies, have been snapping up stocks related to any kind of hot technology, helping them to go public quickly during this crazy market mania — and that has certainly included a bunch of “future of transportation” stocks that would love to be the “next Tesla” or get that Tesla halo in some way, including the electric truck startup Nikola (NKLA) that got everyone all hot and bothered earlier this year.
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If you’re not familiar with how SPACs work, they are publicly traded pools of cash — they are brought public by a manager who raises cash with the intention of spending it (within two years) to merge with or acquire a business. Once they go public they then have two meaningful assets: a major exchange listing, and a pool of cash on the books, and they offer both of those things to a company that wants to go public. They can bring a new company public by merging with them, and do so much more quickly, with much less scrutiny and often less cost, than a traditional underwritten IPO.
And while SPACs have been a fun backwater of the investment world for decades, occasionally surfacing a compelling investment idea but more commonly withering on the vine, they have become “hot” in the past year or two, thanks to the high-profile SPAC conversions that have amply rewarded shareholders like Nikola (NKLA), Virgin Galactic (SPCE, which is the second stock Abeyta hints at as his “space tourism” play), and DraftKings (DKNG). So I imagine this one Abeyta is talking about is probably not as “unheard of” as you might imagine, though if the deal hasn’t been consummated yet, and the name change hasn’t happened, it might still be under the radar (or lidar, ha!) for folks who aren’t really following the SPAC world.
Which leads us to the final question… which one is it? A couple more clues…
“… this company’s leadership was invited to present to J.P. Morgan’s popular Auto Conference earlier this month…
“It’s as easy as buying a stock in a normal brokerage account, and you can do it for less than $20 right now.”
And, more recently, that news that “the secret will be out” on September 29.
Thinkolator sez that this time he’s teasing Velodyne Lidar, a pioneer in lidar systems that was planning, upon first publication of this article, to go public through a reverse merger with the SPAC Graf Industrial (GRAF), in a deal that was announced in early July. It’s certainly not a secret move, but the shareholder vote did take place and give it the rubber stamp of approval yesterday, and today Graf officially became Velodyne Lidar, with the new Nasdaq ticker VLDR.
Velodyne does indeed expect revenue to hit $600 million by 2024 as autonomous vehicles become more mainstream, a substantial jump from the roughly $100 million in revenue they have now — most of the current revenue is from mapping companies and technology, robotics, and earlier-stage driver assistance technologies, not from active lidar systems for production cars. VLDR was expected to have a market cap of about $1.8 billion when the deal is finalized (assuming a share price near the $10 fair value of GRAF, which they haven’t seen in a long time), and Velodyne’s existing investors will own the lion’s share of the business (80%+ of the shares). GRAF shareholders got excited about the deal, on the day it was announced GRAF shares jumped from $13 to $20, and they had already gotten a little “rumor” buzz in the days before that (it looks like rumors of the negotiations between the two companies leaked out starting around June 27), so the pro forma value of the public company for a while got up to nearly $5 billion during the height of SPAC mania a month ago (GRAF briefly got ab