Why SPAC 10X Capital’s share jumped today

What happened

Actions of 10X venture capital acquisition (VCVC) were up sharply on Wednesday, after the specialist acquisition company (SPAC) announced its merger 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.

So what

REE Automotive has developed a series of electric vehicle “platforms” which can be used as the basis for many different types of vehicles. In industrial terms, REE’s products are flat electric vehicle “skateboards” that are modular, meaning that the components can be arranged to support vehicles of various shapes and sizes.

The idea is that with REE platforms, commercial fleet customers can create electric vehicles tailored to their needs at a reasonable cost and with a low total cost of ownership.

REE Automotive has developed a series of platforms for electric vehicles. Image source: REE Automobile.

Here are the highlights of the merger deal announced on Wednesday:

  • 10X Capital is contributing approximately $ 200 million in cash to the transaction.
  • The merged 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 (MGA 0.68% ) and Indian truck manufacturer Mahindra and Mahindra (MAHMF -0.81% ). PIPE was “oversubscribed,” 10X said, meaning there was more investor interest than it could accommodate.
  • The deal values ​​the merged company at $ 3.6 billion.

REE expects to begin mass production of its platforms in 2023 and generate sales of $ 19.1 billion by 2026. Its order backlog has “indications of interest” for more than 250,000 of its platforms, he said, representing 27% of that expected turnover.

Now what

Auto investors have known that stocks of electric vehicles have been hot for months. That’s why shares of this PSPC surged after the deal was announced with REE on Wednesday.

If all goes according to plan, the merger should be finalized by the end of June.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

Sallie R. Loera