Moderation Team
Ouster and Velodyne, two lidar companies, have agreed to a merger in an all-stock transaction, the companies said Monday. Both Ouster and Velodyne will maintain a 50% stake in the new company, according to the agreement that was signed on November 4.
The merger comes as many in the industry, including autonomous vehicle technology company Cruise’s CEO Kyle Vogt, have been expecting another round of consolidation in the lidar space. That’s in part because there are too many lidar companies for how many OEMs are implementing the sensor for autonomous driving applications. It’s also because many of these companies, including Ouster and Velodyne, went public via special purpose acquisition (SPAC) at potentially inflated valuations that were based on projected revenue, not actual revenue.
Earlier this year, Velodyne acquired AI and lidar company Bluecity.ai, and last year, Ouster acquired lidar startup Sense Photonics. AV company Aurora bought out Blackmore in 2019, and Cruise acquired Strobe in 2017.
Both Velodyne and Ouster have been struggling with plummeting stock prices over the past year, and neither has been able to turn a profit yet. The companies closed out the second quarter with a net loss of $44.3 million and $28 million, respectively. Loss-generating companies can often maintain investor faith if they at least generate regular increases in revenue, which Ouster has done year-over-year. But Velodyne’s revenue doesn’t seem to have grown at all in the past year; rather it fell 41%.
By merging, the companies hope to combine forces and create scale “to drive profitable and sustainable revenue growth,” according to Velodyne’s CEO Ted Tewksbury.
The companies say that the merger will allow them to realize annualized cost savings of at least $75 million within the nine months after the transaction closes, as well as $335 million in combined cash for the third quarter.
The merger may also be a lifeline for Velodyne, a company that has been struggling over the past year with a series of internal dramas, including the resignation of its CEO Anand Gopalan last July. (Tewskbury took over for him in November.) Velodyne never said why Gopalan resigned, but his leaving cost Velodyne $8 million in equity compensation, according to 2021’s second quarter earnings report.
Source: www.yahoo.com
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