Dealflow | September 30, 2020

Greenhouse venture AppHarvest will reach the Nasdaq before its tomatoes reach consumers

Jessica Pothering
ImpactAlpha Editor

Jessica Pothering

ImpactAlpha, September 30 – High-tech greenhouse grower AppHarvest, which will go public via an acquisition by Novus Capital Corp., ticks the boxes for high impact and high profile. High-tech, sustainable agricultural production. Coal-country job creation. Bold-faced investors and board members like Martha Stewart, Narya Capital’s J.D. Vance, Lupa Systems’ James Murdoch, Inclusive Capital’s Jeffrey Ubben and Black Capital’s Kevin Johnson. And now, an acquisition by a special purpose acquisition company, or SPAC, that will provide $475 million in fresh capital and a $1 billion valuation. 

What the Morehead, Ky. B Corp. doesn’t have yet is revenues, nor its first tomatoes, which are set to be planted within weeks in its 2.6 million-square-foot greenhouse. The first harvest is due early next year. 

“We wanted to take the company public as we were about to start selling our fruits and vegetables,” AppHarvest’s Jonathan Webb told ImpactAlpha, “to let consumers be owners in the company and to help rebuild agriculture in America with us.”

The deal is a signal of the next, tech-driven stage of agricultural production. “Controlled environment agriculture is riding the S-curve of tech productivity,” Equilibrium Capital’s Dave Chen, an AppHarvest board member, said. Equilibrium owns AppHarvest’s Morehead greenhouse, as well as a stake in the company. 

The $100 million from the Novus SPAC, along with $375 million through a PIPE, or a “private investment in a public entity,” gives AppHarvest the ability to expand production and pursue its own acquisitions. “Structuring the company so it can access capital and consume capital is a competitive advantage,” Chen says.

Flush with cash

Novus listed on the Nasdaq exchange in May as a “smart tech” SPAC. Such “blank check” companies exist to acquire other companies—just no one knows what company exactly. 

Other sustainability-focused SPACs include listings from TPG; Bridges Fund Management and AEA Investors; and EV makers Canoo, Lordstown Motors, Fisker and Nikola. 

Ubben, who also is an investor in Nikola, told The New York Times. “There’s a legacy company balance sheet, and there’s this new model.” 

Novus’s initial $100 million raise is being supplemented with the $375 million PIPE, which includes Fidelity Management & Research Co., Inclusive and Novus. AppHarvest also issued a $30 million convertible note to Inclusive.

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AppHarvest will use the capital to build new greenhouse facilities across the U.S.’s Appalachia region. AppHarvest previously raised a total of $150 million. 

The announcement comes a month after AppHarvest closed a $28 million Series C venture funding round, backed by Inclusive, Equilibrium, Lupa Systems, Black Capital, Breyer Capital, S2G Ventures and Endeavor Catalyst.

Webb acknowledges the considerable leap to going public. “We’re on a steep growth trajectory, but we don’t have a choice,” he says. “The climate is rapidly changing. Farmers don’t have the predictability to be able to grow outdoors. In the U.S., California is where we grow our food, but it’s drought stricken. It’s on fire. The food system here is very fragile. COVID has exposed that even more so.” 

The SPAC financing model promises capital to fuel green, low-carbon tech ventures as production and consumption shifts, he says. “In our lifetime, most power will come from renewable resources, most cars will run on electricity, and most fruits and vegetables will be grown in a controlled-environment facility.”