Family offices, SPACs and the race for electric cars

One of the most dynamic parts of the global investment world today is the confluence between family/principal offices and SPACs. And one sector where that confluence is at its most interesting – and is proving very profitable – is in the world of electric automobiles. 

Last week, hedge fund billionaire Louis Bacon, through his investment office Moore Strategic Ventures, invested $50 million in Californian-based electric car maker, Fisker. Today, Spartan Energy Acquisition Corp, a SPAC (Special Purpose Acquisition Company) owned by private equity titans Mark Rowan and Leon Black said it would merge with Fisker and IPO the business. 

The merger values Fisker at $2.9 billion, but is sure to go much higher as investors pour money into electric car-makers. Tesla now has a market cap of more than $280 billion. Nikola Corporation, the Tesla for trucks, went public in the first week of June – it now has a market cap of $19 billion. 

Investors believe electric cars are now mainstream and arguably one of the most transformative technologies to evolve in the 21st century. Money is rushing into the sector, hence the incredible valuations. 

As Bacon was doing the deal with Fisker his fellow hedge fund billionaire George Soros, through his family office, Soros Fund Management, invested in Rivian, a Michigan-based eclectic car marker. Soros teams up with other powerful investors, including Amazon, T. Rowe Price, Fidelity, and Blackrock. Billionaire Ron Baron, through his asset management group Baron Capital, also invested. 

Rivian, which makes SUVs and pick-up trucks, has swallowed up more than $5 billion from backers. But Rivian is unlikely to disappoint its investors when it IPOs, expected soon, given Nikola and Tesla share prices.  

Rivian is also likely to look favourably on the SPAC model to market, given what Fisker has just done and Nikola did with VectoIQ when it listed last month. 

Although there’s plenty of institutional money attracted to the electric car and businesses linked to the sector, like lithium battery makers and electric vehicle charging networks, principal/family offices are prominent in the area. 

And on the SPAC side, family offices are often their biggest sponsors. Those links will likely grow substantially in the years ahead.