Category Archives: Technology

Houston SPAC to take space technology company public

Credit: Made in Space (a Redwire company)

Genesis Park, a Houston-based Special Purpose Acquisition Company (SPAC), has agreed to take Redwire, a space technology company, public.



Genesis Park went public in November 2020 in a $150 million IPO.

Redwire, is based in Jacksonville, FL and manufactures space-capable robotics, solar arrays and antennas, and other equipment used in space. It plans to manufacture and assemble components in-space using 3D printing. The company was formed in June 2020 from the merger of two companies, with backing from AE Industrial Partners. Since then, it has made five more acquisitions.

Redwire becomes the seventh space venture in the past year to announce a SPAC deal. It had revenues of $120 million in 2020 and is currently cash flow positive. By 2025, it expects to grow to $1.4 billion. The transaction values the company at $615 million enterprise value.

Its CEO, Peter Cannito, was previously the CEO of Polaris Alpha, a high-tech solutions provider that developed systems for the Department of Defense. He’s also spent 12 years working for PE-backed companies in the defense, technology and government services market.

Jonathan Baliff, the CFO of Genesis and former CFO at Bristow Group, will join the Board of Redwire as a non-executive director.

The deal is expected to close by June 2021.

Investor Presentation – Genesis Park Redwire

Houston blank check company to take security screening company public

 

NewHold Investment Corp will take Evolv Technology public in a transaction that values the business at $1.25 billion. Evolv is a leader in AI touchless security screening with its head office in the Boston area.



The technology uses artificial intelligence and data science to screen people for weapons and other threats. The company says its platform eliminates the need for devices like metal detectors and physical security checks. It is used at venues such as Six Flags amusement parks, the Lincoln Center in New York and at the stadiums of the New England Patriots, Chicago Cubs and Manchester City.

Evolv has some high profile backers. Bill Gates is a shareholder and the $300 million stock private investment (PIPE) will include investments from Peyton Manning, Andre Agassi, Steffi Grafi, Joe Torre and Theo Epstein.

Customers pay a monthly subscription for using the service, rather than buy hardware. In 2020 the company had 209 units deployed, generating revenues of $4.3 million. It lost $26 million at the EBITDA level. However, the company projects it will have over 8,000 units deployed by 2025 and revenues of $595 million.

NewHold raised $150 million in an IPO in July 2020. The deal is expected to close in the second quarter.

Evolv Investor Presentation

Houston blank check company to take bitcoin miner public

Good Works Acquisition Corp has agreed to a reverse takeover of Cipher Mining Technologies. Cipher is a newly-formed US-based Bitcoin mining company that is being carved out of New York-based Bitfury Group. Bitfury provides Bitcoin mining hardware and other blockchain software and services.



Good Works went public in October 2020 with an initial public offering of $150 million.

The transaction values the combined group at $2 billion. In addition, the business will have $500 million of cash on hand (and no debt). That will allow Cipher to build out its operations.

Currently there are about 18.6 million Bitcoins in circulation out of a maximum supply of 21 million. That was set in 2008 by its inventor, Satoshi Nakamoto (probably a pseudonym for unknown persons). As part of its records creation process, more and more computing power is needed to create new Bitcoins. Currently China accounts for about 65% of all Bitcoins mined globally.

Cipher intends to initially build 4 data centers (3 in Texas, 1 in Ohio) with a power capacity of 445 MW. These will be built in 2021 and 2022. The business plans to expand these data centers between 2023-2025 with an additional 300 MW of power. By 2025, the business intends to mine 21,000 Bitcoins.

The company states that it has 5 year supply contracts with CloudHQ and Vistra for Texas at an average price of 2.7 cents per kWH. However, the small print in the investor presentations state these are letter of intent prices. It will be interesting to see if proposed solutions to the recent Texas power grid problems will significantly impact the rate.

SEC filing – Good Works Cipher merger

 

Houston blank check company finds acquisition target

Houston blank check company, Peridot Acquisition Corp, has agreed to buy Li-Cycle for $1.1 billion in a reverse takeover. Li-Cycle is a lithium-ion battery recycling company, based in Toronto.



Peridot went public in September 2020 with the aim of finding an acquisition in the environmental infrastructure or renewables sector, so Li-Cycle definitely fits the bill.

Li-Cycle aims to recycle electric vehicles batteries. In addition to end of lifecycle recycling, 5%-10% of battery production is rejected as waste during the manufacturing process. As EV production ramps, Li-Cycle sees a big and growing market. It uses a non-thermal process to recycle the batteries, allowing it to recover 95% of the battery mass.

Li-Cycle is still in a start-up phase. It currently has three locations in North America that shred and mechanically separate batteries. The company is also developing a hub in Rochester, New York that will produce, at scale, lithium carbonate, Nickel Sulphate and other high-grade minerals for resale.

It has signed 40 commercial contracts with suppliers, including over $900 million in contracted off-take.

The deal values Li-Cycle at 10 times 2023 projected EBITDA. At close, the business will have $566 million in cash on hand. That will allow Li-Cycle to fund the capital expenditures required to complete its business plan.

The combined company will be led by Li-Cycle CEO Ajay Kochhar. Fellow co-founder Tim Johnson will be the Executive Chairman. Peridot CEO Alan Levande will join the Board, as will Scott Prochazka, ex-CEO of Centerpoint Energy.

SEC filing – Peridot Li-Cycle acquisition

 

Houston scientist settles grant fraud allegations

Dr. Rouzbeth Shahsavari has agreed to pay nearly $150,000 to resolve allegations that he and his company defrauded the National Science Foundation (NSF) and the Navy.



Dr. Shahsavari is the owner and chief scientist at C-Crete Technologies Ltd in Stafford, SW Houston. He started his company while completing his PhD at Massachusetts Institute of Technology (MIT).  The company is developing new uses for advanced materials using nanotechnologies and advanced computations.

The company applied for grants to NSF and the Navy in 2015 and 2016. One of the conditions of any grant was that the applicant must have a subaward agreement with a collaborating research partner. Dr. Shahsavari said he had such an agreement with Rice University when, in fact, he did not. (He is, though, an Assistant Professor at Rice).

The company also failed to notify Navy personnel that their designated principal investigator had stopped working for the company almost three months before the grant was awarded.  Assuming the allegations were true, in both circumstances, the company was ineligible to receive the $147,589 grant.

The claims resolved by the settlement are allegations only. There has been no determination of liability.

https://www.justice.gov/usao-sdtx/pr/houston-scientist-settles-grant-fraud-allegations

ION Geophysical agrees to out-of-court restructuring

Poseidon

ION Geophysical, based in west Houston, has reached agreement with 84% of its senior note holders for a debt-for-equity swap that will reduce debt by up to $120 million. The deal was made without going through Chapter 11 restructuring.



The company was originally an offshore seismic data provider. More recently, it has been trying to grow its business in mission critical software to optimize vessel movements and operations.

The company has debt, net of cash, of $92 million and negative shareholders’ equity of $61 million. It has $121 million of loan notes due in December 2021. The agreement calls for these notes to be redeemed for $18 million of cash and $107 million of new convertible notes due in 2025.

If all the loan note holders convert, the company will no long-term debt and equity of $73 million. At the midpoint of the conversion price range, the loan note holders will own approximately 74% of the proforma equity. Existing shareholders will be diluted down to 21%. The remaining 5% is from a $25 million rights issue the company is planning to make. The company expects that most of the participants in the rights issue will elect to receive loan notes rather than equity.

ION has relatively new senior management. CEO Christopher Usher was appointed to the role in May 2019, though he joined the company in 2012. Mike Morrison has been interim CFO since his predecessor, Steve Bate, retired in February. Mr. Morrison joined the company back in 2002.

[Update 12-29-20 The company issued an 8-K announcing that Mr. Morrison was appointed CFO back in September. Oops. Base salary $300k]

ION’s largest shareholder is China National Petroleum Corporation, who own 10.6% of the stock.

SEC filing – ION Geophysical restructuring – Project Poseidon

Houston oilfield telecoms company to be acquired

Rignet, based in west Houston, has agreed to be acquired by Viasat, in an all-stock transaction that values Rignet at $222 million enterprise value.



Rignet originally provided remote communication networks for the offshore sector. More recently the company has been diversifying into mission-critical IoT (Internet of Things) applications and systems integrations for energy telecom projects.

The company has revenues of $225 million. However it also has debt of over $100 million that primarily expires in 2022. Rignet went public via an IPO in 2010. Its largest shareholder is a Kolhberg Kravis Roberts, who own 25%.

Viasat is based in Carlsbad, California and is a leader in satellite-based networking products and services to the consumer, enterprise and government. It has revenues of $2.3 billion and a market capitalization of over $2 billion.

The existing management team of Rignet will operate the business from the Houston headquarters.

The companies expect the deal to close in mid-2021.

SEC filing – Rignet takeover

HPE to relocate head office to Houston area

Photo: Patrinely Group and CDC Houston

Hewlett Packard Enterprise (HPE) has announced it is moving its head office from San Jose to the Houston-area, though it is not clear how many jobs will relocate. HPE has revenues of $27 billion and a market capitalization of $14.4 billion. It provides servers and networking solutions aimed at large enterprises.



HPE was spun off from HP in 2015, with HP concentrating on consumer products. The largest concentration of HPE employees in the US was already in Houston. That was a result of its 2002 takeover of Compaq, founded in 1982 in Houston.

HPE’s current CEO Antonio Neri was based out of Houston for 11 years, prior to his relocation to California in 2015.

HPE will be moving into a newly-built campus in Springwoods Village, due to be completed in 2022. The HPE campus will consist of two five-story buildings totaling 440,000 sq. feet.  Construction started pre-pandemic so it’s not clear how much of space they will really need. Springwoods Village is also home to ExxonMobil’s 3 million sq. ft campus and HP’s 378,000 sq. ft campus.

Both HPE and HP previously occupied the former Compaq campus in NW Houston but decided to move after that campus was badly flooded in both 2016 and 2017 (Hurricane Harvey).

SEC filing – HPE relocation

Houston software CEO charged with evading tax on $2 billion of income

Bob Brockman, 79, has been charged with tax evasion, wire fraud, money laundering and other offenses. The scheme ran for 20 years. Prosecutors say it is the largest tax fraud case against an individual in the US.



Mr Brockman has his primary residence in the Memorial Villages area of Houston. He founded Universal Computer Systems in 1970. The business supplies software to assist car dealerships in managing their inventory. In 2006, it took over a publicly-traded rival called Reynolds & Reynolds for $2.8 billion. Mr Brockman remains the CEO of the combined business, still privately-owned and based in Ohio.

Mr Brockman is a former trustee of both Rice University and Baylor College of Medicine.

Robert Smith – Co-operating with the government

At the same time that prosecutors were announcing the charges, they also issued a press release stating that Robert Smith, an Austin-based billionaire had entered into a non-prosecution agreement. Mr Smith agreed to pay $139 million in taxes and penalties . He also agreed to abandon a refund claim of $182 million that he had filed against the IRS, related to charitable contribution deductions. Most damaging, Smith agreed to co-operate with the government investigation against Brockman. The investigation of Mr Smith took four years.

Mr Smith made headlines last year when he pledged to pay off the $34 million of student loan debt for the Morehouse College graduating class.

The Scheme

Smith and Brockman met in 1997 when Mr Smith was a Goldman Sachs. At Brockman’s urging Smith founded Vista Equity Partners, a PE firm, in 2000.  Brockman invested $1 billion in the first fund. When the portfolio companies in that and subsuquent funds were later sold at a profit, Brockman used a series of offshore companies and trusts, that he secretly controlled,  to allegedly avoid paying capital gains tax.

Brockman used a proprietary, encrypted email system to communicate with the trustees and nominees that he controlled.  Each person had a codename. At one point, Brockman emailed the trustee and reminded him that

‘all copy machine/laser printer paper has encoded into it the manufacturer of that paper as well as the year and month of manufacture. For that reason I always set aside some packets of copy paper with dates on them – for potential future use.’

The trustee is also co-operating with the government.

In all, Mr Brockman faces 39 counts. If convicted, he faces a substantial prison term and restitution and criminal forfeiture.

https://www.justice.gov/opa/pr/ceo-multibillion-dollar-software-company-indicted-decades-long-tax-evasion-and-wire-fraud

Brockman indictment

Industrial blank check company completes IPO

Industrial Tech Acquisitions has completed its Initial Public Offering (IPO). It raised $75 million by offering 7.5 million units at $10 each.  The company initially filed last month and planned to raise $60 million.



Industrial Tech Acquisitions is seeking to buy a technology business operating in the industrial or energy area. This includes software, mobile and IoT (Internet of Things) applications, cloud communications and ultra-high bandwidth services. Targets would have am enterprise value of between $250 million and $500 million.

The company has its head office in the Galleria area and its CEO is Scott Crist. He has founded, run and exited a number of businesses in the technology, telecommunications and industrial sectors.

The company has 21 months from the closing of the IPO to finalize an acquisition, though that could be extended by a maximum of 9 months, if they are close to a deal.

Industrial Tech will be listed on the NASDAQ under the ticker symbol ‘ITACU’. The company joins two other Houston blank check companies that are publicly traded (Graf Industries and Landcadia Holdings II).

You can see the complete list of Houston-area public companies here

S-1 Final – Industrial Tech Acquisitions