AEVA (NASDAQ $IPV, $AEVA) Spac Merger – Lidar Company Recommendation

A quick background on AEVA

Aeva was founded by former Apple Inc. engineers Soroush Dardashti and Mina Rezk. In 2018, the company raised $45 million in a series A funding round co-led by Lux Capital Management and Canaan Partners.

Rezk, who previously designed optical hardware for Nikon and worked alongside Salehian at Apple’s Special Projects Group.

They employ about 100 people in Mountain View, California.

Aeva is planning to merge with a special purpose acquisition company called InterPrivate Acquisition Corp.

What does AEVA do?

Aeva has created a miniaturized solid-state photonics chip, called Aeries, that reduces the size and power requirements of typical LIDAR systems. It will cost less than $500 at scale, compared to tens of thousands of dollars.

Instead of pulsing a laser beam that bounces off of objects in a vehicle’s path to determine distance and depth, Aeva’s system emits a continuous, low-power laser beam that measures changes in the frequency of waves reflected off of objects.

What is the unique technology that AEVA has developed?

Aeva’s technology is unique as it has a 4D map. AEVA can measure distance as well as instant velocity without losing range all while preventing interference from the sun or other sensors.

Its technology is also said to use less power which allows it to integrate better with perception software. Its technology is primarily meant for autonomous cars but it is also being leveraged for ADAS systems.

Aeva says its sensor does not rely on powerful lasers or exotic materials, which has helped it to shrink the cost and size of the device.

Aeva’s 4D LIDAR-on-chip uses a continuous laser beam to measure the change in frequency of the waveform as it reflects off of an object. This allows it to detect an object’s range and instant velocity simultaneously beyond 300 meters at high accuracy. Aeva’s 4D LiDAR is free of interference from other sensors or sunlight and it operates at fractions of the optical power typically required to achieve long range performance. 

A key differentiator is breaking the dependency between maximum range and points density, which has been a barrier for time-of-flight and FMCW LiDARs so far.

AEVA LiDAR integrates multiple beams on a chip, each beam uniquely capable of measuring more than 2 million points per second at distances beyond 300m.

All lasers, detectors, circuitry, are integrated on a chip at the wafer level, and it’s in production for volumes already targeting use in major OEMs. It will be in cars in the 2022 to 2023 timeline.

AEVA’s sensing system is capable of completely shutting out interference from other, similar sensors — including those from other companies — and operating in all weather conditions and in the dark, thanks to a reflectivity sensor.

Why is AEVA better than Velodyne or Luminar?

It has high resolution, long range, additionally it gives velocity. It’s scalable because it’s all on a photonics chip–a very small package with low power consumption.

A few other LIDAR startups also rely on a version of frequency modulation. But Aeva’s system uses a continuous beam, rather than a pulsed beam. 

Who is AEVA partnering with?

Aeva and ZF, a top global automotive Tier-1 supplier, are partnering to bring the world’s first Frequency Modulated Continuous Wave (FMCW) LiDAR to the automotive market. 

The company has signed a sensor-system deal with an Audi-owned unit that is working on self-driving technology for Volkswagen Group and is working with German automotive supplier ZF Friedrichshafen to have its sensors in mass production by 2024.

Are there other use cases for AEVA?

It has also attracted consumer electronics companies likely phone manufacturers who want to get into smart glasses and augment their smartphone camera systems with LIDARs for better portrait photography, autofocus, low-light performance and augmented reality. 

An increasing number of devices, such as Apple’s new iPad Pro and iPhone 12 Pro models, include lidar sensors that help with applications such as augmented reality, in which digital content is overlaid on the real world.

Who is InterPrivate Group?

InterPrivate is a SPAC led by private equity investor Ahmed Fattouh. It raised $210 million in an initial public offering in February. InterPrivate Acquisition Corp valued AEVA at $2.1 billion. InterPrivate is lead by private equity investor Ahmed Fattouh expects the deal to be closed by early 2021.

When will we see this in cars?

Aeva’s lidar has been on test vehicles for some time, including an experimental version of Audi’s E-Tron. The first commercial application may come in lightly automated, or Level 2, vehicles, but right now, all VW will say is that it plans to put Aeva’s lidar on the ID Buzz AV. That’s a more completely automated, or Level 4, minibus; it’s scheduled to launch in 2022/2023.

What is the valuation for AEVA?

Aeva was last valued at $460M in 08/19, and its public valuation on the merger date 11/20 was $2.1B. Today (12/29/20) it is valued at over 3.2B (8X valuation gain in 1 year).

Investors include Porche, Audi, Canaan Partners, Lux Capital, Volkswagen Group.

The deal will provide up to $343 million of gross proceeds to AEVA.

Who are the competitors?

AEVA competes with 70+ other LIDAR companies including Waymo (Google), Velodyne, Luminar, Ouster, Quanergy systems and Innoviz.

What is the financial model?

Aeva is expecting meaningful revenues only by 2024. As you can see from their projections, it goes from $11M for next year 2021 to $236M in 2024 and $880M by 2025.

If those projections work out, then given their long term expectation of 62% gross margins, this could end up at nearly $350M in adjusted EBITDA by 2025.

Should you buy the stock?

IPV is a NASDAQ listed SPAC and trades today (12/29/20) at $15.12. That implies a valuation for AEVA at over $4B, twice the proposed valuation at time of acquisition announcement.

With no significant revenues until 2022 or later, this is a purely speculative play. I would recommend a small position close to $13 – $14 and patience for 2+ years.