Innovative automotive software co LeddarTech going public via SPAC

 Innovative automotive software co LeddarTech going public via SPAC

Image courtesy: LeddarTech

Quebec City-based innovative automotive software provider, LeddarTech Inc., has announced that it is going public on NASDAQ via SPAC. The company has entered an agreement with Prospector Capital Corp., a publicly traded SPAC led by former Qualcomm President Derek Aberle and chaired by former Qualcomm Vice Chairman Steve Altman.

The transaction values LeddarTech at US$348 million equity value. The company is expected to get up to US$66 million in gross cash proceeds in the deal. And it plans to invest those funds in embedded software project commercialization, product expansion and customer engagements.

To provide some background, LeddarTech was born in 2007 as a software firm headquartered in Quebec City, Canada. It has R&D centres across the world, such as Montreal, Toronto and Tel Aviv, Israel. The company is a disruptor of low-level sensor fusion/perception technology for ADAS (Advanced Driver-Assistance Systems) & AD (Autonomous Driving). Fuelled by innovative proprietary AI/computer vision algorithms, it enables economical development of advanced driving solutions that enhance safety & reduce costs related to automotive grade systems.

The company has an impressive record of 150 patents filed (with 80 granted) across signal acquisition techniques, which is no mean feat. However, it has had to contend with the slowing down of the autonomous vehicle market and a dipping excitement in the area.

Also read: Canada and US are launching first joint EV charging network

Wait, but aren’t SPACs dead?

Special purpose acquisition companies (SPACs) are blank-check entities that first raise money through an initial public offering (IPO). The sponsors form them specifically to acquire a third-party company. SPACs, by themselves, do not have business operations or stated targets for acquisition initially. In the IPO route, a private company issues new shares on a public exchange. However, in a SPAC transaction, the privately-held firm goes public via a merger with an existing listed shell company, the SPAC.

SPACs became all the rage around three years ago, by the second half of 2020. Mature-stage private companies treated them as an exciting way to go public without as much legwork. Globally, 2021 was the bumper year for SPACs, and there were record 791 global SPAC IPOs in 2021, as per Pitchbook data. However, SPACs have been in trouble of late. Despite the creation of all those SPACs in 2021, only 467 acquisitions were actually completed. This means numerous more firms were founded and listed in 2021 but had no eventual transaction. 2022 saw less than a third of that action.

Against this backdrop, LeddarTech’s decision to go public via SPAC is interesting, to say the least.

While SPACs may not be the first option, the private funding market and IPO environment are also in a deep freeze. Q1 2023 was the second-worst VC funding quarter in Canada since Q3 2020. Investors, in general, do not expect Q2 to be significantly better. And the freeze is much worse at the growth stage than for early-stage startups. This leaves fewer options on the table for growth-stage private companies. LeddarTech last raised capital in its US$140M Series D round in February 2022.

Automotive software leader, LeddarTech and Prospector have synergy

Not all SPACs are equal, and hundreds are in the market to close a target transaction. SPACs have a finite amount of time, usually two years, to make an acquisition. Else they must return cash to shareholders, though extensions are possible.

Therefore, targets like LeddarTech examine the SPAC sponsor organization more closely. Special scrutiny is on the potential benefits they bring to the target beyond providing financial support. And this is where Prospector seems to have sealed the deal due to its sponsor team’s deep tech background & synergy of experience leading Qualcomm.

LeddarTech’s current CEO of 10 years is retiring from the executive role after the transaction. This is a potential indicator that both parties are comfortable with Prospector having more say, despite the cutting-edge nature of business.

“After leading the company since 2013, I have decided that I will retire as CEO once we close the transaction. At which time Frantz Saintellemy, President and COO, is expected to succeed me as LeddarTech CEO. I plan to remain with the company as a special advisor and as a member of the LeddarTech board of directors.”

Charles Boulanger, CEO of LeddarTech

Derek Aberle, Prospector’s CEO, also indicated that his prior experience had relevance. He mentioned that he’d seen immense value created at Qualcomm by innovators with foundational technologies. And that LeddarTech could potentially achieve the same by disrupting its industry. Aberle will take over as Chairman of the board at LeddarTech upon completion of the deal.

Also read: Tesla unlocks its EV charging network for GM in Canada

What’s next?

LeddarTech claims its software solution offers better performance and scalability for entry-level to premium ADAS/AD. It does so while being sensor- and processor-independent and lowering costs to OEMs and Tier 1-2 automotive suppliers. The company said that the market for ADAS and AD is the biggest in automotive software. It will reach $42 billion in revenue by 2030, growing at an 11% CAGR. With more than seven years of expertise working on low-level sensor fusion and perception, the business claims to have a significant early-mover advantage.

Frantz Saintellemy said that the automotive industry is moving towards “software-defined vehicles”, a trend that will need next-generation ADAS systems. He added that LeddarTech had leadership in the software-only solutions for low-level sensor fusion and perception that it believes will help “drive the next wave of ADAS”. The company is actively working with customers to integrate their technology.

Waymo (Alphabet), Cruise (General Motors), Chinese Baidu and AutoX, as well as Mobileye, an Israeli company acquired by Intel Corp, have been competition in the autonomous vehicle space.


Also read: Volkswagen to build the largest battery factory in Canada

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