Amazon Reportedly Orders 1,000 Autonomous Driving Systems from Plus

Ahead of its merger with special purpose acquisition company (SPAC) Hennessy Capital Investment Corp V (NASDAQ: HCIC), which was announced last month, autonomous truck startup Plus has reportedly secured an order of 1,000 autonomous driving systems from e-commerce behemoth Amazon.com (NASDAQ: AMZN).

The rumor sent Hennessy Capital Investment Corp V shares up by 5% this morning, but the stock has since given back most of those gains.

As of 1:15 p.m. EDT, Hennessy Capital Investment Corp V was up less than 2%. Here’s why.

Amazon wants 1,000 autonomous trucks

Bloomberg reports that Amazon has placed the order, but is also in negotiations to potentially buy a 20% stake in Plus. Amazon could secure the investment with warrants that give it the right to buy preferred shares at a price of approximately $0.47 per share, according to the report.

The SPAC deal values Plus at a post-money equity valuation of $3.3 billion and is expected to raise $500 million in gross cash proceeds for Plus once the transaction closes in the third quarter.

Landing a huge order from a giant company like Amazon would be massive validation for Plus as it continues to develop Level 4 autonomous driving technology. Self-driving vehicles have revolutionary potential for commercial fleet operators. 

Amazon has been expanding its in-house logistics operations for years, displacing traditional carriers like UPS (NYSE: UPS) and FedEx (NYSE: FDX) for last-mile delivery services. The company is also electrifying its vehicle fleet, ordering 100,000 custom electric delivery vehicles from startup Rivian as well as a few smaller providers like Lion Electric Company (NYSE: LEV) and Lightning eMotors (NYSE: ZEV). Adding autonomous trucks to the mix is an obvious move for Amazon.

However, the possibility of Amazon buying a large stake in Plus is offsetting the positive news, as the warrants would be meaningfully dilutive to existing shareholders. 

$2.8 billion and counting

The reported structure of the negotiations falls in line with Amazon’s pattern of accumulating warrants in smaller business partners to give it some optionality should it seek to take over a company.

For example, Amazon previously bought warrants in Air Transport Services Group (NASDAQ: ATSG) and Atlas Air Worldwide Holdings (NASDAQ: AAWW), its two main air cargo operator partners. Earlier this year, Amazon exercised its warrants for Air Transport Services Group to take a minority stake in the company. Another commercial partner that Amazon holds warrants for is grocery distributor SpartanNash (NASDAQ: SPTN). 

Over the years, Amazon has grown its investment portfolio and was holding a whopping $2.8 billion worth of equity warrants at the end of the first quarter, according to regulatory filings. Those holdings represent a significant chunk of Amazon’s overall investment portfolio of $8.4 billion, which includes stock and warrants in both public and private companies.

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