The Stock Market Discovers Indoor Ag In A Big Way

Robinhood antics aside, there’s no hotter topic in finance right now than SPACs (special purpose acquisition companies), and even indoor agriculture has become caught up in the buzz.

SPACs, or special purpose acquisition corporations, are a shell company that lists itself on a stock exchange and then uses the listing proceeds to acquire or merge with another company. It’s an attractive route to raising funds for companies looking for a faster and cheaper way to list than the rigours of the traditional IPO process. 

Though SPACs have been around since the 1990s, they have had a reputation for being “the buyer of last resort”, primarily owing to a spate of failures in the early 2000s. The approach has once more taken off in recent years. There was nearly 8x as much raised in 2020 as in 2018, and 2021’s total has already surpassed last year’s[1]. The approach has become so hot that even Goldman Sachs junior investment bankers recently complained that they were burned out by the sheer volume of SPACs they’re working on[2]. 

This newfound enthusiasm is generally traced to a combination of tighter SEC regulations, efforts by cash-rich private equity companies to exit portfolio companies and fewer traditional IPO listings. Higher quality sponsors, such as 40-year old private equity firm Thoma Bravo, lead some to believe that things are different this time around.  The lustre of famous SPAC participants – such as baseball player A-Rod and basketball legend Shaquille O’Neal – has helped things along.  

Detractors point to post-listing underperformance by SPACs, high fees to sponsors and opaqueness around the acquisition of companies.  SPAC rules mean that institutional investors sometimes get to see information on potential acquisitions ahead of retail investors.[3] On a recent Clubhouse chat, one investor compared SPACs to the risky no-revenue internet listings of the late 1990s. Another questioned whether retail investors’ appetite for such vehicles would cause greater market volatility[4].

Dan Bienvenue, the interim CEO of mega public pension fund CALPERs, recently described SPACs as “fraught with potential misalignment, potential governance issues”.[5] That said, similar dire warnings have accompanied the rise of many a new approach in finance, most recently equity crowdfunding, and have proven wrong as often as right.

As is so often the case in indoor agriculture, cannabis companies have led the way when it comes to SPACs, generally listing in Canada owing to the US federal prohibition on the crop. One example is Choice Consolidation Corp, which raised $150mm in February, and says that it plans to acquire “existing strong single-state operators”[6].

Historically, food-focused indoor agriculture companies have sourced little of their capital from public markets, preferring instead to work with private equity and strategic investors. To be sure, there is a small cadre of listed CEA firms, such as Canadian greenhouse operator Village Farms (TSE: VFF) and Canadian grow system tech company CubicFarm Systems Corp (TSXV: CUB) are exceptions to this rule.

All of that changed last month when Kentucky-based greenhouse company AppHarvest raised $475mm through NASDAQ listed SPAC Novus Capital. The funds will fuel the expansion of up to a dozen new farms through 2025.

Naturally, the move has led to speculation that vertical farms and greenhouses will follow suit, though it’s worth noting that the rules that govern SPACs aren’t necessarily friendly to CEA companies. They favour large, highly valued companies that easily capture the attention of retail investors, and those are not plentiful in CEA.  

Regardless of whether the SPAC trend becomes a permanent feature of the indoor farm fundraising landscape, one more method of accessing capital for CEA can only be a good thing. For the moment at least.

For more information:
Contain
www.contain.ag

Note: None of the above constitutes investment advice.

Sources:
[1] SPACInsider figures
[2] “Goldman’s junior bankers complain of crushing workload amid SPAC-fueled boom in Wall Street deals”, CNBC, March 18, 2021
[3] For instance, where a PIPE is being considered by the SPAC
[4] “SPACS: IPO 2.0 & Agrifoodtech Exits”, March 4, 2021
[5] “CalPERS’ Bienvenue: SPACs are fraught with potential misalignment”, Private Equity International, March 16, 2021
[6] “New cannabis SPAC raises $150 million in IPO for US acquisitions”, Marijuana Business Daily, February 19, 2021

Publication date: Wed 24 Mar 2021
Author: Rebekka Boekhout
© VerticalFarmDaily.com

Chinese Startup Gets In On Ground Floor Of High-Rise Farms

Sananbio Develops Techniques And

Hardware To Drive Indoor Agriculture

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Sananbio has successfully grown more than 300 types of plants without the help of the sun. (Photo courtesy of Sananbio)

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XIAO YAN, 36kr

August 17, 2020

BEIJING -- A Chinese company expects the future of high-rise farming to arrive in 2025. That's when the costs of conventional farming are expected to match those of vertical farming, when growing food inside urban towers will be able to address population and environmental issues in a more economical way, and when the indoor agriculture market is expected to be worth $9.9 billion.

Sananbio is the vertical farm leader in China, and the market estimate is from Grand View Research of the U.S.

The sector is still getting off the ground, but overseas startups have succeeded in raising large amounts of money.

Sananbio was created in 2015 by the Institute of Plant Research at the Chinese Academy of Sciences and the Fujian Sanan Group. It inherited the Institute of Plant Research's plant technology and Fujian Sanan's capabilities in optoelectronics, a field concerned with the use of electronics and light. With these tools, it conducts research into biotechnology, photobiology, indoor agriculture, and other areas.

It currently holds 416 patents, nearly 60% of which have been filed with the Patent Cooperation Treaty, an international organization that helps patent holders gain international protection for their inventions.

Sananbio has set up research facilities in Fujian and Anhui provinces and operates large indoor farms in Beijing, Shanghai, and other major cities.

In the U.S. state of Nevada, it is developing cultivated varieties for the North American market. In Singapore, it is developing indoor farming technologies for desert and island countries.

In 2015, Sananbio worked with another research institute to build a 10,000 sq. meter indoor farm that grows leafy vegetables with artificial light, the first such facility in the world.

Its latest triumph is Uplift, a system for unmanned agricultural factories that can create construction plans for factories based on internal layouts so that sowing, dividing roots, and daily management can be automated. The system also can reduce the use of pesticides.

The company has successfully grown more than 300 types of leafy vegetables, fruits, herbs, edible flowers, and medicinal herbs.

Sananbio's business model is to provide hardware and vertical farming solutions to farmers who want to innovate and companies looking to enter agriculture. It also provides ongoing technical support. Its research facilities in Fujian, Anhui, and the U.S. already supply technology, and globally the company either owns or services 120,000 sq. meters worth of indoor farms. More than 50 indoor agricultural facilities in the U.S., Canada, Japan, South Korea, Singapore, the United Arab Emirates, the U.K., Saudi Arabia, and Germany use Sananbio facilities.

Looking ahead, the costs associated with conventional farming will match those of vertical farming around 2025, according to Zhan Zhuo, Sananbio's general manager. If this forecast is accurate, opportunities for vertical farms to spread quickly would explode, Zhan said.

The company says it is also making progress in other areas, such as plant-based bioreactors, planters for home use, and exhibition indoor farms for educational purposes.

36Kr, a Chinese tech news portal founded in Beijing in 2010, has more than 150 million readers worldwide. Nikkei announced a partnership with 36Kr on May 22, 2019.

For the Japanese version of this story, click here.

For the Chinese version, click here.