Indie Semiconductor in Aliso Viejo plans to go public at a valuation of about $1.4 billion, as it seeks a larger piece of the growing automotive technology market.
The autotech-focused chip and software company, formed in 2007 and last year shipping its 100 millionth unit, recently announced plans to go public via the increasingly popular special purpose acquisition company, or SPAC, route.
The reverse merger transaction with SPAC Thunder Bridge Acquisition II Ltd. (Nasdaq: THBR), a blank-check firm based in Great Falls, Va., that raised $345 million in a 2019 initial public offering, is expected to close in the first three months of this year (see related story, page 15).
Indie, whose executive team counts ties to several chipmakers with significant local operations such as Skyworks Solutions Inc., Broadcom and Conexant, will have nearly $500 million in cash before expenses following the reverse merger with Thunder Bridge and a simultaneous private investment in public equity, or PIPE, financing deal.
Expect the funds to be put to use, as the company has ambitious plans for product expansion and revenue growth, execs said.
“We have pretty aggressive goals,” Indie Chief Executive Donald McClymont told the Business Journal on Dec. 21. “We want to drive the company to be a significant player in the market that we service.”
The company is expected to be listed on the Nasdaq under the ticker symbol INDI. The approximately $1.4 billion valuation foreseen is the estimated post-transaction equity value.
Park Assist, Self-Driving
The company’s offerings include Advanced Driver Assistance Systems that help with parking and collision avoidance, along with backup and forward cameras to avoid driving errors. Its chips will ultimately be used with self-driving cars.
Indie’s products are used in the park assist feature of cars made by Hyundai Motor America, whose “Smaht Pahk” campaign was promoted heavily by the Fountain Valley-based automaker last year.
Indie also focuses on the interfaces linking users’ mobile phones with car infotainment systems, and the company says it is developing vehicle electrification products for the future.
Top Suppliers
Aptiv, Valeo and Methode are among the dozen Tier 1 auto suppliers that have given their approval to Indie Semiconductor’s product lines. Tier 1 refers to the most important company in a supply chain.
Those companies then supply Indie’s chips and software to car manufacturers such as Volvo, Tesla and Ford.
Indie has estimated revenue of $23 million for the 2020 fiscal year and plans to grow revenue to about $500 million in five years, according to regulatory filings.
Indie Semiconductor’s planned growth reflects major changes in how cars work.
“If you look at a car today, it’s becoming a little more like a cellphone,” McClymont said. “The interface between the user’s mobile device and the car infotainment system is an area where we focus.”
It is not expecting to show a profit as measured by EBITDA (earnings before interest, tax, depreciation and amortization) until fiscal year 2023.
Its optimistic growth projections are justified, according to Thunder Bridge.
“Today, Indie’s automotive semiconductor portfolio addresses a $16 billion market, according to IHS, which is expected to exceed $38 billion by 2025 driven by strong demand for silicon and software content in automobiles,” according to the Dec. 15 press release announcing the reverse merger.
Indie estimates the amount of silicon content in each new car will grow from $310 today to about $1,000 in the near future, and nearly $4,000 eventually, as new autonomous driving features and other next-gen applications are expanded.
The company says its technologies “represent the core underpinnings of both electric and autonomous vehicles, while the advanced user interfaces transform the in-cabin experience to mirror and seamlessly connect to the mobile platforms we rely on every day.”
Thunder Bridge and Indie said in a joint statement that Indie has a more than $2 billion strategic backlog and an additional $2.5 billion in identified pipeline opportunities driven by relationships with Tier 1 automotive suppliers.
Local Base Remaining
Indie’s base will remain in Orange County post-merger, officials said. The company leases about 18,000 square feet of space just off Aliso Creek Road, according to brokerage data.
“Our headquarters will stay in Aliso Viejo, or at least in Orange County,” said McClymont, a native of Scotland.
Indie currently has about 150 employees worldwide, with a little less than half of them in Orange County.
Indie has design centers and sales offices in Detroit; Boston; Austin, Texas; Edinburgh in Scotland; the German city of Dresden; and Wuxi, China.
Upon the closing of the transaction, the combined company will be led by Indie’s existing management team, including McClymont; co-founder and President Ichiro Aoki, and co-founder and Chief Technology Officer Scott Kee.
Prior to founding Indie, McClymont held executive roles at Axiom, Conexant and Skyworks.
Existing investors in Indie, whose outside board of directors include Bill Woodward of Anthem Venture Partners and Steve Fu of WRVI Capital, will retain a 62% stake in the public company post-merger, according to regulatory filings.
Indie would be the first OC-based chipmaker to go public in about a dozen years, and its plans mark the latest chapter in OC’s long history of fostering chip companies, including Broadcom, Microsemi, Mindspeed, Conexant and Jazz Semiconductor.
Currently, fellow chipmaker Syntiant Corp. in Irvine is actively seeking to become a leader in the voice-activated chip sector (see story, page 3).
Auto Revolution
Indie Semiconductor is likely to face growing competition in the future.
“Investors have to assume a lot of risks that the business model plays out as expected over the next few years,” analysis website SeekingAlpha.com said. “The auto tech sector is highly competitive and should only become increasingly hot as the big semiconductor companies further enter the space.”
“Regardless, this deal provides an interesting opportunity for investors to jump into a long-term growth story in the early stages,” Seeking Alpha added.
As of Jan. 5, shares in Thunder Bridge, the SPAC, had risen about 22% to $13.13 apiece since the deal was announced.
OC’s SPAC Attack Continues
Indie Semiconductor is following the path of several OC companies—both financial firms looking for crowd-pleasing investments and private companies seeking quick access to capital—that see the advantage of public listings via SPACs.
For example, Roth CH Acquisition I Co. (Nasdaq: ROCH), a special purpose acquisition company backed by Newport Beach’s Roth Capital Partners, said in November it would bring public PureCycle Technologies, an Ohio-based plastic recycling company that’s projected to be worth $1.2 billion; see the Nov. 30, 2020 print edition for more.
A second SPAC backed by Roth is underway and searching for merger candidates.
Allied Esports Entertainment Inc. of Irvine (Nasdaq: AESE), which operates venues and live events for video gaming enthusiasts, went public via a special purpose acquisition company in 2019, while several other local firms have also done so or are following suit.
Among the latest deals announced: WM Holding Co., the parent of Weedmaps, an Irvine-based online provider of the locations of cannabis dispensaries, last month announced plans to go public through a SPAC that may value the company around $1.5 billion.
See the Dec. 21, 2020 print edition for more on that company’s plans.
Landsea Homes, the Newport Beach-based homebuilding subsidiary of China-based real estate company Landsea Group, has also gone public via a special purpose acquisition company and began trading last Friday; see the Jan. 4 print edition for more.
Quick Process
SPACs are essentially blank-check firms—usually sponsored by private equity or similar investment firms—that raise a lot of cash from investors, go public, and search out a private company to acquire, using the money they’ve raised in the IPO.
Investors in a SPAC are betting that the management team of the blank-check company can identify an up-and-coming, or undervalued, private company, and help it grow, sometimes with the help of the existing private company’s exec team, sometimes without.
Donald McClymont, Indie’s co-founder, chief executive and chairman, emphasized that the SPAC arrangement is “a faster way to IPO than the regular path” while the capital raised is fundamental to accelerate growth.
Companies that go public via SPACs often tout very optimistic growth expectations—a practice that is constrained in the traditional initial public offering process.
Hence, SPAC-backed startups can make rosy projections about future results with less risk of facing lawsuits than they would if disclosing those figures in a traditional IPO, industry watchers note.
Track Record
U.S.-listed SPACs raised $82 billion in 2020, a more than sixfold increase from the year before and a figure greater than all of the money previously raised by SPACs, according to year-end data from industry market tracker Dealogic.
Deals involving next-gen automakers aiming to be the next Tesla—and suppliers to those types of firms, like Indie—have been among the biggest recipients of SPAC funds. Irvine’s Karma Automotive is said to be considering going public via this route.
Indie Semiconductor wouldn’t be the first OC-based semiconductor company to go public via a SPAC.
Acquicor, a SPAC formed in 2005 by a group including Apple co-founder Steve Wozniak and former CEO Gil Amelio, took Newport Beach’s Jazz Semiconductor public in 2007, paying some $260 million.
The timing of the deal proved poor, and Jazz’s stock cratered within a short time, dropping the company’s market cap below $20 million at one point.
Jazz was acquired by Tower Semiconductor in late 2008 for $42 million.
—Kevin Costelloe
