Why shares of SPAC 10X Capital jumped today
Shares of 10X venture capital acquisition (NASDAQ: VCVC) were up sharply on Wednesday after the Special Purpose Acquisition Company (SPAC) announced it would merge with electric vehicle platform maker REE Automotive.
As of 3 p.m. EST, 10X Capital stock was up about 43.8% from Tuesday’s closing price.
REE Automotive has developed a series of electric vehicle “platforms” that can serve as the basis for many different types of vehicles. In industry parlance, REE’s products are flat EV “skateboards” that are modular, meaning the components can be arranged to support vehicles of different shapes and sizes.
The idea is that with REE’s platforms, commercial fleet customers can create electric vehicles tailored to their needs at a reasonable cost and with a low total cost of ownership.
Here are the highlights of the merger agreement announced on Wednesday:
- 10X Capital is contributing approximately $200 million in cash to the transaction.
- The post-merger company will receive an additional $300 million through a fully committed “PIPE” (private investment in public capital). PIPE investors include a major supplier to the automotive industry Magna International (NYSE: MGA) and Indian truck manufacturer Mahindra and Mahindra (OTC: MAHMF). PIPE was “oversubscribed,” 10X said, meaning there was more investor interest than it could accommodate.
- The deal values the post-merger company at $3.6 billion.
REE expects to begin mass production of its rigs in 2023 and generate $19.1 billion in revenue by 2026. Its order book contains “indications of interest” for more than 250,000 of its platforms, he said, accounting for 27% of that expected revenue.
Auto investors know that electric vehicle stocks have been white hot for months. This is why shares of this SPAC jumped after the announcement of the agreement with REE on Wednesday.
If all goes as planned, the merger should be completed by the end of June.
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