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Top 3 SPAC Targets – Drones and Robots with Jobs
by Nicholas Alan Clayton on 2022-08-19 at 7:18am

SPACInsider contributors Anthony Sozzi and Sam Beattie this week compiled their three favorite potential SPAC targets among companies producing either drones or robots taking over jobs in the inflation-stricken economy. We look at why they are compelling and why each could be a fit for a blank-check merger.


There are already plenty of reasons for SPACs to be looking at robotics, autonomous and otherwise. The hot sector is expected to grow at a CAGR of 27.5% through 2026, reaching $120.3 billion that year, according to Pitchbook. And, the trends pushing this market’s growth are only accelerating.

Geopolitical risks are ballooning the demand for autonomous and manned drones in the defense sector, while labor costs and supply chain concerns are fueling a greater need for robots that can pick up the slack in the commercial sector. Pitchbook predicts demand for autonomous mobile robots (AMRs) will outpace that of industrial robots this year, but by 2024, the average cost of an industrial robot is expected to drop below $25,000, further propelling their proliferation.

North America has just had its best quarter for robotics sales to date, with 11,595 industrial robots ordered in the first quarter of 2022, up 28% from the same period a year before, according to the International Federation of Robotics. Carmakers and automotive parts manufacturers accounted for nearly half of these orders despite supply chain snares slowing production.

This industry alone now has about 109,400 robotic units installed worldwide in 2021, and that doesn’t mean it is getting to a point of saturation. While stationary robotics on an assembly line can be upgraded piecemeal, mobile robots and AMRs are inserting themselves into industrial and commercial processes that were previously fully manned. And, as many newer EV companies attempt to go with a smaller manufacturing base, mobile robots are key to maintain efficiencies.

Flytrex

And, while these machines have reached a fair amount of penetration in the industrial sphere, the consumer and non-industrial commercial sphere has seen adoption in fits and starts. The promises of flying cars and ubiquitous robot deliverymen have not quite arrived, but they are close.

Amazon (NASDAQ:AMZN) announced that it will commence drone deliveries in parts of California and Texas this year and Walmart (NYSE:WMT) has begun drone deliveries within a mile of its Arkansas HQ. This one-mile radius is not a technical limitation, but a Federal Aviation Authority restriction in the US, which it just expanded to two nautical miles.

Both giants are likely lobbying for a further expansion of this radius, but for now it serves the interests of independents looking to build out a network before major players can claim all of the airspace. Sedalia, North Carolina-based Flytrex is one such challenger. It offers on-demand food delivery by drone in three two-mile radial zones in North Carolina and one in Texas.

These are in small towns and suburbs so far because they provide large backyards to land in and fewer tall obstacles. But, these areas still cover 60,000 residents. This also puts Flytrex at a similar commercial scale in drone delivery as Amazon and Walmart, which have each poured oodles of capital into their own efforts. Flytrex, by contrast, has only raised $59 million to date from since its 2013 founding, $40 million of which came in a November 2021 Series C.

Flytrex plans to continue to focus on suburban US zones, not only because of these operational advantages, but because such areas generally don’t have as wide of delivery options as urban neighborhoods. Its drones can also in theory compete on speed as well, able to deliver up to 6.6 lbs at 32 miles per hour as the crow flies while ignoring all traffic signs and lights.

In addition to local restaurants and grocers, food and beverage players Ben & Jerry’s, Jersey Mike’s Subs, It’s Just Wings, and Unilever (NYSE:UL)’s ice cream brands have all inked agreements to get their goodies to consumers in these zones, indulging purchasers within three minutes of their splurge buy in some cases. As Flytrex expands its reach, it will be bringing these brands and likely soon others along for the ride.

G Squared Ascend II (NYSE:GSQB) could be SPAC to help it get to those yards faster. It raised $143.8 million in its June 2021 IPO and has until June 2023 to complete a transaction. Its team’s pending combination with B2B freight optimizer Transfix is similarly a play for logistics disruption.

Neura Robotics

But, back in the factory, Metzingen, Germany-based Neura Robotics is among the companies working on the next generation of robots on manufacturing floors.

It has focused in developing collaborative robots or “cobots” that are not handling 100% of the job but mere taking over the heavy lifting and some of the technically precise functions of a given spot on the line. The market for this type of robotics is expected to grow from a roughly half-billion market to $8 billion in 2030, according to Pitchbook.

Neura’s more basic robotic arm models have already been in circulation for years, but it is working on building more cognitive power into its builds. This is the trickiest part of robotics development so far, but its goal is getting a cobot with at least an intern’s level of knowledge of which tool a car-assembler or surgeon will need next.

Perhaps most promising is the fact that it has already bridged the east-west divide with a structure that may insulate it from trade and regulatory disputes. It grew as a German subsidiary of a JV launched in China’s Shenzhen industrial region. There, it has sold about 80,000 units of its more basic models, but there will be potentially long-term monetization opportunities for its “smarter” builds.

This foothold in China may bring some regulatory risk, but it also taps into huge demand. China has set a goal of supplying 70% of its domestic market with robotics manufactured within its borders. So, any Western country looking to get in on that massive opportunity is going to have to have at least some manufacturing base on the mainland.

SkyDrop

But, drone deliverers are still going to be a major part of the picture, and not just in the remote humanitarian applications we’ve featured before.

SkyDrop is commercializing the drone delivery for the thing we all order most – pizza. It is already in the second phase of development for rolling out a fleet for Domino’s Pizza Enterprises. This partner holds the exclusive franchisee rights for the brand in Australia, New Zealand, Belgium, France, The Netherlands, Japan, Germany, Luxembourg, Denmark and Taiwan.

Its first bid is to drone-deliver pizzas in New Zealand and trials are beginning this year with models designed to carry up to three extra-large pizzas or two large pizzas plus a soda and side order. The Reno, Nevada-based company has also been at it (at an admittedly small scale) for a while now.

It made its first drone delivery seven years ago with a model that is now enshrined in the Smithsonian. Whether that will end up being a “Kitty Hawk moment” for the industry or not remains to be seen. But, with all of the evidence that drones are efficient at delivering violence, it stands to reason that the consumer applications will come eventually.

NewHold II (NASDAQ:NHIC) could be the right vehicle for it, having raised about $195 million in its October 2021 IPO. It was able to pull together a $300 million PIPE for its combination with AI-based event-security firm Evolv (NASDAQ:EVLV), which closed in July in 2021.

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