AeroFarms goes public via SPAC to ‘set the narrative’ in vertical farming

Co-founder David Rosenberg says he saw risk in allowing other companies’ technology to define the category for public market investors.

AeroFarms listed on the Nasdaq exchange on March 26 after finalizing a special purpose acquisition company transaction, which co-founder and chief executive Daven Rosenberg said would help set the tone for the vertical farming market.

“There’s a lot of players in the vertical farming space that aren’t as far along as they otherwise could be,” Rosenberg told Agri Investor after the merger with the Spring Valley Acquisition SPAC. “Their technology isn’t as impressive as it otherwise could be.

“I thought it would be important to help set the narrative of the industry to share our story before someone else does something, and the world looks at the wrong leader in taking the tone.”

Spring Valley Acquisition is a SPAC sponsored by Dallas, Texas-headquartered Pearl Energy Investments that raised $230 million in its November 2020 IPO.

Last week’s merger included a $125 million private investment by unnamed institutional investors at $10 per share and was expected to provide $357 million in gross proceeds to AeroFarms, which now trades under the symbol ARFM. The Newark, New Jersey-headquartered company uses aeroponics and LED lighting systems in nine indoor farms to produce its Dream Greens brand leafy greens, which are sold at Whole Foods, ShopRite and Amazon Fresh outlets in the north-eastern US.

AeroFarms describes itself as a technology platform focused on the plant biology, mechanic, data, genetic and environmental and operational components of optimizing indoor cultivation of more than 550 plant species. It has secured more than 250 invention disclosures and 45 recognized trade secrets related to vertical farming. Monetizing this intellectual property is an important part of AeroFarms’ strategy.

Rosenberg said AeroFarms has already partnered with a well-known company, which he declined to identify, to develop a standalone, machine vision-enabled imaging offering that would be announced shortly.

On an investor call, Rosenberg likened the potential evolution of AeroFarms’ technologies to the growth of Amazon from its initial focus on books and Tesla’s development of autonomous vehicles and batteries after beginning with a focus on electric cars.

“In the same way, leafy greens at AeroFarms is our beachhead, and we look forward to utilizing our platform in many ways,” he said.

Chief financial officer Guy Blanchard said on the call that, without any significant technology breakthroughs, AeroFarms is already capable of achieving farm-level unlevered IRRs in the high 20 percent to low 30 percent range. He said the company plans to be EBITDA positive in the second half of 2024 and forecasts gross margins of nearly 50 percent and EBITDA margins in the mid-30s by 2026.

Blanchard added that AeroFarms plans a network of new farms across North America, starting with a Virginia facility to be operational in mid-2022 before adding 15 additional farms within five years.

Since it was founded in 2004, AeroFarms has raised more than $200 million from investors that included the Abu Dhabi Investment Office, ADM Capital’s Cibus Fund, Wheatsheaf Group and others. Rosenberg said many existing investors told AeroFarms they plan to hold the stock as long-term investors.

He added that rapid evolution of SPAC offerings over the past few weeks had demonstrated how that market also contains long-term investors, alongside traders, that are eager to support AeroFarms’ wide-ranging plans.

“I’ve been building ‘change the world’ type companies for a while,” said Rosenberg, who previously founded a business focused on waterproofing concrete, according to his LinkedIn profile.

“I believe one doesn’t build a company with the mindset of what the exits are. You just aim to build a great company and then the exit will come. That said, I don’t look at this an exit, I look at this as a means to the next part of our journey.”