Vertical farming start-up AeroFarms is going public through a SPAC. The deal is reportedly valued at $1.2 billion and will close in Q2 of this year. The transaction will reportedly leave the merged entity with over $300 million of unrestricted cash at close.
More on AeroFarms
Founded in 2004, AeroFarms is a leader in the world of vertical farming. Vertical farming is exactly what it sounds like: the practice of growing crops in vertically stacked layers.
In its press release, AeroFarms explained that it "helps solve issues brought on by macro challenges such as population growth, water scarcity, arable land loss, health consciousness, and supply chain risks like the COVID-19 pandemic. AeroFarms has developed patented and award-winning technology in areas such as plant biology, mechanical design, environmental control, data science, operations, and plant genetics."
As a result of its technology, AeroFarms claims that it achieves up to 390 times the productivity of traditional farming methods on a per-square-foot basis. Meanwhile, AeroFarms uses 95% less water and no pesticides.
AeroFarms Co-Founder and CEO David Rosenberg explained, "At AeroFarms, our mission is to grow the best plants possible for the betterment of humanity, and we are executing on this by taking agriculture to new heights with the latest in technology, innovation, and understanding of plant science."
Nice pun from Rosenberg there. In all seriousness though, this is the exciting part of what companies like AeroFarms are building. Just like how landlords want to maximize the square footage available to them, so do those using vertical farming techniques. Look for more infrastructure to be built for vertical farming in the coming years. We've even seen crowdfunding platforms targeted specifically at farming gain traction.
SPACs, or special purpose acquisition companies, are created to raise money that will be used to take a private company public through a merger at a future date, which is why people often refer to them as "blank-check" companies. When you invest in a SPAC, you're really investing in the management team's ability to find a suitable company to take public in the near future. In this case, the company has been identified.
The Millionacres bottom line
There's no question that this technology is needed for a multitude of reasons, from a sustainability standpoint, to food production capacity increases related to population growth, to enhancing supply chains.
That said, the deal itself speaks to the froth in the SPAC markets as AeroFarms has a projected revenue of $4 million for 2021. That would value the company at 300 times projected 2021 revenue.
As a commercial real estate investor, you may want to keep an eye on this space. Companies like AeroFarms will be opening up more investment opportunities into indoor farming projects going forward.