Autonomous driving start-up Aurora plans to go public through SPAC deal with initial value of $11 billion
Aurora, a self-driving firm, is going public by merging with a special purpose acquisition firm in a deal that values it at $13 billion, a premium to rivals. One day, the firm thinks it can transform transportation, and maybe it can. But what it’s worth depends on when the market for autonomous vehicles arrives – a risk for its many peers too.
Several self-driving firms are going public or already have, giving credibility to the idea that autonomous vehicles will go mainstream. Embark Trucks, which makes software to use on multiple trucks is valued at 1.6 times 2025 revenue, while TuSimple (TSP.O), which is already public, is valued at 5 times the same year. Aurora’s merger with Reinvent Technology Partners Y (RTPY.O) values it at over 80 times 2025 revenue, and a more reasonable 5 times projected 2027 revenue.
Of all of them, Aurora talks a good game. Its executives include the former heads of self-driving programs at Tesla (TSLA.O), Uber Technologies (UBER.N) and Google. They’ve created a stack of hardware, software and used a massive simulated driving program with the aim of getting autonomous trucks on the road in 2023 and then expanding to other markets such as ride hailing. And Aurora’s partnerships with Toyota Motor (7203.T) and truck makers Paccar (PCAR.O) and Volvo may be a leg up commercially. LinkedIn founder Reid Hoffman and Zynga founder Mark Pincus are in on the deal too.
Valuation comparisons in SPAC-world, however, presuppose estimates several years out are correct. Aurora thinks if it captures 12.5% of the trucking market and less than 1% of the passenger rides market by 2030, it could have up to $24 billion of revenue. But it’s not for nothing that most established listed companies don’t publicly project that far ahead. Moreover, full autonomy may still be years away. Self-driving systems still have problems with unusual road circumstances. A complicated patchwork of laws and regulators could also delay roll-out.
A thought experiment illustrates the problem. If all goes to schedule, say Aurora’s future cash flows really are worth its post-deal enterprise value of $11 billion. And now imagine things take longer. With a three year delay, and a 15% discount rate, that $11 billion opportunity would only be worth about $7 billion today – a roughly one-third mark-down. Distance matters as much as destination.
July 19, 2021