Arbe Robotics: Buy the New Autonomous Car SPAC?

Earlier this week, Arbe Robotics announced that it would be merging with special purpose acquisition company (SPAC) Industrial Tech Acquisitions (NASDAQ: ITAC) in a deal that values Arbe at nearly $600 million. Arbe provides high-resolution 4D radar imaging technologies to automakers that incorporate the sensors into advanced driver-assistance systems (ADAS).

Here’s everything that investors need to know about Arbe Robotics.

Why Arbe Robotics’ SPAC 

Arbe was founded in 2015 by a group of semiconductor engineers and radar technology specialists. The company says that its long-range radar sensors, which are built using a proprietary chipset, offer higher resolution at lower costs to car companies that are developing ADAS with varying levels of autonomy.

Compared to current radar sensors on the market today, Arbe claims that its 4D imaging radar will perform better in a wider range of weather conditions while being more affordable and power efficient. Conventional radar systems can also be prone to false alarms due to a limited field of view. Those systems are also not designed to detect stationary objects, whereas Arbe’s can do so reliably. 

Keep in mind that this is different from lidar sensors, which utilize lasers to create depth maps of the surrounding environment. Many companies pursuing autonomous driving are leveraging lidar, but Arbe points out that radar and camera systems are the two dominant types of sensors in use right now. 

The combination of radars and cameras is the sensor strategy that Tesla (NASDAQ: TSLA) has decided to implement. CEO Elon Musk has long been a critic of lidar in the development of autonomous cars (although Musk’s SpaceX uses lidar sensors in its Dragon capsule). Arbe points to a Musk quote from 2019 arguing that “lidar is doomed.”

As no one has successfully achieved full Level 5 autonomy, the answer regarding the necessary sensor suite remains unclear and the debate will rage on for years to come.

Arbe Robotics’ Business Pipeline

Arbe currently has 26 partnerships with companies that are interested in incorporating its technology, including a variety of automotive suppliers. The company has scored a partnership with a leading Tier 1 automotive supplier based in Europe for an unnamed global automaker — an unmarked Volvo (OTC: VLVLY) vehicle is displayed, suggesting that the Swedish car company is the customer.

The total addressable market (TAM) for automotive radar sensors is expected to grow from $4 billion in 2020 to $11 billion in 2025, representing a compound annual growth rate (CAGR) of 21%. That would be the fastest growing segment of the broader automotive sensor market, according to Arbe.

Arbe’s current revenue base is fairly negligible, generating just $400,000 in sales last year. Revenue is forecast to grow significantly to $7.8 million this year based on expected unit sales of approximately 6,000. Longer term, the company hopes to bring in over $300 million in sales in 2025.

The SPAC details: Merging with ITAC 

The merger with Industrial Tech Acquisitions will infuse Arbe with $177 million in gross proceeds, consisting of $77 million in the SPAC’s trust account in addition to $100 million in PIPE (private investment in public equity) financing.

The transaction will give Arbe an enterprise value of $573 million, and the SPAC’s public shareholders will end up owning approximately 11% of the combined company.

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