Tritium Is the Latest EV SPAC

Special purpose acquisition companies (SPACs) have become the preferred way for electric vehicle (EV) startups to go public. The latest EV company to join the SPAC boom is Tritium, which has just announced that it will merge with Decarbonization Plus Acquisition II (NASDAQ: DCRN) in a deal that values Tritium at $1.2 billion.

Here’s what EV SPAC investors need to know.

What is Tritium?

Tritium is an Australian company that specializes in manufacturing EV charging stations. The company was founded back in 2001 and initially focused on developing solar race cars but has since pivoted to working on DC fast charging technology. 

The company’s model includes upfront hardware sales combined with recurring revenue from software and services. The majority of current revenue comes from selling charging stations to site hosts. To date, Tritium has sold over 4,400 DC faster chargers (under 50 kW).

Tritium has developed what it calls its modular, scalable charging (MSC) platform, which allows charging stations to be upgraded after the initial purchase. The chargers are liquid cooled and available in different power levels ranging from 50 kW to 350 kW.

The market for EV charging infrastructure is expected to expand from $3 billion in 2020 to $50 billion in 2026. Tritium notes that the infrastructure build out is expected to occur first while EV adoption among consumers will follow as people are more likely to buy an EV if they’re confident there are enough places to charge.

Total revenue was $59 million in 2020, up from $50 million in 2019. That may not seem like particularly impressive growth, but Tritium notes that its supply chain was significantly disrupted last year by the COVID-19 pandemic. Approximately 96% of 2020 revenue came from charger sales, with just 4% coming from software.

Like many SPAC deals, Tritium is highlighting extremely optimistic forecasts for future growth. The company is modeling for revenue to soar to over $1.5 billion in 2026, at which point it believes that software and services will comprise over 25% of sales.

How the deal is structured

Decarbonization Plus Acquisition II currently has roughly $403 million in cash in its trust account and there is no PIPE (private investment in public equity) component of the deal. Tritium currently has around $5 million in cash. The transaction values Tritium at $1.2 billion, with a post-money equity value of $1.7 billion after the merger closes.

An estimated $108 million of that total cash will be used to pay down debt and cover transaction expenses, with $300 million going to the combined company’s balance sheet. Existing Tritium shareholders are rolling over their equity and are expected to own 70% of the new company. The SPAC’s public investors will collectively own 24%, while the SPAC sponsors will take home a 6% stake for putting the deal together.

Tritium estimates that it will only need $68 million in capital to get to the point where it can start generating positive free cash flow in 2023. Once the merger is completed, the ticker symbol will change to “DCFC.”

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