Bus And Battery Maker Proterra Exits SPAC With $640M Payout

Electric bus and battery maker Proterra Inc. begins its life as a publicly-traded company Wednesday, ringing the bell on the Nasdaq as it collects a $640 million payout from its special purpose acquisition company (SPAC) sponsor.

But Proterra CEO Jack Allen said more than money was involved with Proterra's choice to take the shortest route to the market where it will trade under the Nasdaq ticker symbol PTRA.

Regardless of the method, Proterra was ready to go public, Allen said.

"We just felt like we had a better story and that we had a story that was going to appeal to the market, no matter whether we did an IPO or whether we did a SPAC," he said.

Telling Its Story

"Most people thought of Proterra as a transit bus manufacturer. But really, over the last three or four years, we've transformed this business dramatically to be an electric vehicle technology company that makes battery systems," Allen told FreightWaves in an interview.

Proterra is a 17-year-old company that, unlike many SPAC-sponsored electric vehicle and infrastructure startups, actually books revenue. And not just a little. The company has generated  $200 million, primarily by building and selling electric transit buses.

But Proterra is also a Tier 1 supplier to eight commercial vehicle companies including Daimler Trucks North America and Komatsu, the Japan-based construction, mining, forestry and military equipment maker. 

And Proterra has a charging and infrastructure business that has installed chargers with a total of 46 megawatts of capacity across North America.

"So, the problem if you just do an initial public offering is that you can't talk about the future," Allen said. "All you can talk about is the past, and show past performance."

SPAC Scrutiny

In the run-up to agreeing to merge with Arc Light Clean Transition Corp. ACTC in January, Proterra talked to investors about the potential for its lesser-known Proterra Energy and Proterra Powered divisions. A traditional IPO would have disallowed such projections.

In April, the Securities and Exchange Commission (SEC) began to scrutinize SPACs, questioning whether the SPAC sponsor or the target company should be doing the IPO to raise money for the SPAC. 

If the agency does more than guide on the question, the "safe harbor" provisions that let SPAC-based companies make public projections about future products and revenue could be watered down or disappear.

That would cause the already slowing SPAC market to contract farther and faster, according to Steven Davidoff Solomon, of the School of Law at the University of California, Berkeley, writing in The New York Times last Saturday.

The SEC also said stock warrants given to early SPAC investors should be characterized as liabilities rather than equity, a change that involves paperwork but no operational impact in most cases.

More Than Money

Because it was already doing business, Proterra had leverage in choosing a SPAC with expertise in electrification as well as significant money Proterra could use to grow.

"We thought we could be a little more selective," said Allen, who became CEO 16 months ago after serving four years as a Proterra director. Allen retired six years ago from Navistar International Corp. NAV, where he served as chief operating officer under former CEO Troy Clarke.

In addition to the $640 million that Proterra is getting from Arc Light and private investment in public equity (PIPE), Proterra could pull in $100 million from the redemption of warrants to early investors. Few electric vehicle SPACs have stock prices high enough for warrant holders to profitably cash out.

Plans for the money include scaling manufacturing beyond its current ability to produce 645-megawatt hours of batteries at its facility in Los Angeles.

"That's not going to be enough for us, so we will look to replicate that facility in other locations around the county near our Proterra Powered partners," Allen said.

Onshoring Battery Capacity

Proterra also plans to invest in research and development around battery systems. And it will allocate $100 million to partner with one or more of the major offshore battery cell manufacturers to help them add U.S. capacity. Proterra already partners with Korea's LG Chem for the small-format cylindrical cells used in its battery packs.

"We believe it's critically important to have battery cell manufacturing here in the United States," Allen said. "We think it's really important from a supply chain standpoint. We also think it's great to have that intellectual property in the United States. And we think it's great for creating jobs."

Next to semiconductors, the vast majority of which are imported from Asia, battery cells are a commodity in short supply because so few are made in the U.S.

"We want them to be near our customers so we're delivering just-in-time battery systems to them," Allen said.

In addition to making the Jouley electric school bus for DTNA's Thomas Built Buses division, Proterra works with Freightliner Custom Chassis Corp., another Daimler subsidiary, which builds the underpinnings of Class 3-5 commercial delivery vehicles for customers like Amazon AMZN, FedEx FDX, and UPS UPS. Daimler is an investor in Proterra.

Severe service vehicles like cement mixers, refuse trucks and fire trucks are strong candidates for electrification along with trucks that haul containers to and from the nation's ports. 

"Obviously, the holy grail is Class 8 over-the-road vehicles," Allen said. "And our view is that, at the end of the day, battery technology is going to evolve to a point where hydrogen or a fuel cell is not going to be necessary."

Related articles:

Daimler Trucks invests in Proterra electrification SPAC

Truck-focused Electric Island charging site opens in Portland, Oregon

Competition intensifies for commercial vehicle battery makers

Click for more FreightWaves articles by Alan Adler.

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