The Best Pure Play AV LiDAR Stock is an Overlooked SPAC called Graf Industrial $GRAF
So the future of autonomous cars is coming. Well, eventually! In the meantime LiDAR will be a hot commodity as years more of testing and experience will be required. This is a bit of a longer read, so bear with me.
There are dozens of autonomous vehicle startups now in the world with at least a dozen serious EV startups that will also be wanting that technology as the automotive space is disrupted by not one, but two trends.
There have been a ton of SPACS around lately, and I won’t blame you if you missed this one. It’s a bit sneaky and under the radar. Velodyne is a pioneer in 3D sensing for autonomous vehicles (AVs). They created the movement for a 360° roof-mounted LiDAR at the Grand DARPA Challenge in the mid-2000s.
So what? Cue up the blank check company, guys! Oh no! Another blank check company or SPAC (Special Purpose Acquisition Company), you say. Here we go again.
Sky is the Limit for Laser Light Sensors
The company claims more than 300 customers and has booked more than $500 million in revenue since inception. Velodyne said it projects revenue of about $100 million in 2020 but expects it to increase to $680 million in 2024. The mule is called Graf Industrial Corp and the ticker is $GRAF. The price of the stock is currently $15.91 and along with $AYRO might be the best bang for your buck.
Autonomous driving won’t likely occur without LiDAR. Velodyne is one of the leaders. Post deal, Graf Industrial would change its name to Velodyne Lidar and change its ticker symbol to “VLDR.” SPACs are up this year and some of this year’s IPOs really are special. SPACs allow companies to fast track their IPO with weird reverse mergers. $GRAF has a bit of a sketchy past.
But Velodyne appears to be for real. Velodyne Lidar, which is a pioneer in driver assistance technology that is already backed by Ford, Baidu and Nikon.
The number of times it’s been tagged on TechCrunch gives you an idea of why this company is special. So what? Well, this company is one if not the leading supplier of a sensor widely considered critical to the commercial deployment of autonomous vehicles. Remember that MobileEye was acquired for $15.3 billion by Intel.
A SPAC is like today’s version of no-hassle IPOs. SPACs have gained in popularity in recent years as a simpler way to becoming a publicly listed company. They usually go without the significant overheads of investment bankers, roadshows, legal expenses, management commitments and massive quantities of paperwork.
While many of the SPACS in 2020 are sketchy and I have spoken about why Nikola in particular is sketchy, this is not one of them. Velodyne is to the LiDAR sensor what MobileEye was to computer vision for autonomous driving technology. It’s no accident that Hyundai is also a significant investor. The likes of Tencent and Volvo are also partners, according to its website.
I’m not the only investor around who has an eye for their unique place in the AV landscape. So listen up, this is significant. Velodyne goes into the IPO with an enviable history. They have a great brand, and as the original inventors of 3D imaging LiDAR for AVs, robotics and mapping, it is likely that a large percentage of technology, mapping and automotive companies pursuing ADAS and AVs have used their products.
So when does $GRAF become $VLDR? Time will tell. Velodyne founder David Hall and its initial investors will retain an equity interest of 83% in the new company, which is expected to have an initial market cap of $1.8 billion.
So why is this a good deal for investors? The 2020s will be a huge trial decade for the future of the AV sector. The merger will result in ~ $200M on Velodyne’s balance sheet – money to be used for product development, manufacturing expansion and acquisitions.
Current Velodyne shareholders will own 83.5% of the company. The other green ESG EV company I like is Fisker ($SPAQ), but only if the price is drastically decreased.
Velodyne LiDAR technology enables high-level Advanced Driver Assistance Systems (ADAS). However LiDAR is also implicated in many other kinds of technologies, settings and is basically an IoT tech. The smart car is just one part of that. From drones to robotics to smart cities, these sensor are going to be needed in many environments in the future city.
The technology known as LiDAR involves using lasers to generate 3-D images of the environment, and is already used by Ford and Mercedes-Benz. With computer vision, millions of miles of experience and the right software, AVs will one day give us rides to anywhere, making owning vehicles not just obsolete but archaic.
The idea of having to pay car insurance, find parking – that will all be over. Most analysts here believe LiDAR is the holy grail of how this happens.
What is LiDAR?
LiDAR is a sensor that measures distance using laser light to generate highly accurate 3D maps of the world around the car. The sensor is considered by most in the self-driving car industry a key piece of technology required to safely deploy robotaxis and other autonomous vehicles.
There’s no doubt that Velodyne will be an interesting business when it launches. But I’m also confident that there’s no value to be made between now and when the deal launches and VLDR stock hits the exchange. Think about the future market. How lucrative is this sector going to be?
Projections of what Waymo One could become as a moon shot are hilariously high. Marketwatch reports that the self-driving car market is expected to expand by a compound annual growth rate of 36% through 2023, resulting in revenue of $173 billion. It will be a first mover in an important market with thousands of cars possibly one day using its tech.
VLDR is a name to watch when we head into the fourth quarter. Picking up the $GRAF ticker does come with the usual SPAC risks, which are considerable. Like $AYRO you want to wait for the best price. If you did this with $NIO, you bought when it was around $1.60 in October 2019. Today Nio is worth almost 9x that.
The merger is expected to close in the third quarter of 2020. The SPAC is a speculative stock, but eventually VLDR is smart city gold in our opinion at the Last Futurist. Velodyne will become a publicly traded company amid a period of consolidation in the broader autonomous vehicle industry.
Amazon and Apple are also going to be implicated. And Tesla and more companies in China than you think will be competing soon.
Graf’s previous deal with PureCycle Technologies fell apart. According to their LinkedIn, Velodyne already has well over 300 employees. Their Twitter shows a professional brand. Robots and AVs and Drones, oh my! This is practically a smart city stock, if you believe in how LiDAR will be implicated. If you are going to make a bet on smart cities (while we’re leaving cities), you’ll want one of those essential components.
Last Futurist Finds the Startups That Will Matter
This is a futurist’s dream if you are an investor that likes to be a bit ahead of the curve. Velodyne is best known for its “KFC bucket” spinning-laser LiDAR. The design was inspired by sensor failures in vehicles competing in the DARPA Grand Challenge in 2004. Convinced yet?
Spinning LiDAR units are expensive and mechanically complex. Velodyne is the leader of about 65 LiDAR startups all vying to be the best in this hot AV space. At CES 2020 in January new sensors were shown, including a tiny $100 LiDAR unit called Velabit, as well the VelaDome and a software product called Vella. You can check out some of their webinars on YouTube.
LiDAR sensors are likely to be essential to autonomous vehicles. Even if what we once thought was just around the corner is likely years away, so much the better for investors. It will give us some time to see which are the best AV related startups.
If you are an extreme bull about VLDR this is what you see. Revenues are projected to grow from ~$100M in 2019 to $685M in 2024. The valuations above rely on achieving this 7X revenue growth over 5 years – roughly a doubling every year. In reality they will have a lot of competition, so it won’t be easy to keep their space ahead of the pack.
This competition will push them in robotics, drones and other technologies. They won’t just rely on the AV sector. That kind of business diversification is what will make this possibly the real LiDAR winner of the the 2025 to 2035 period. They will likely be acquired in the 2024 to 2027 period.
Very possibly by Amazon, that will likely have a Zoox, Rivian, Velodyne trinity in their pocket eventually. That’s how, in a nutshell, I see transportation, trucking and logistics being disrupted.
Keep an eye on the ticker $GRAF that turns into $VLDR. Those laser sensors are for real.