AppHarvest looks to benefit from ‘blurred lines’ between public and private

The greenhouse grower went public via a SPAC in February and sees an opportunity to capitalize on the widespread demand for ‘high-tech growth investment,’ says president David Lee.

Since Equilibrium helped finance and lead construction of its 60-acre greenhouse in May 2019, grower AppHarvest has attracted a bevy of major names into its orbit.

Former AOL executive Steve Case, activist investor Jeffrey Ubben, author JD Vance and James Murdoch have joined S2G Ventures, Martha Stewart and others in attaching themselves to the Morehead, Kentucky-headquartered company. Central to AppHarvest’s approach is the presentation of indoor ag’s environmental and food security benefits alongside an explicit focus on rural development.

Star power no doubt smoothed AppHarvest’s path to public markets through a $475 million special purpose acquisition company deal in February that brought it onto the Nasdaq exchange.

In early March, AppHarvest reached another milestone when it acquired the Morehead facility from Equilibrium in a $125 million deal that included the land housing the greenhouse, which has been producing tomatoes since January. It presented the acquisition as an opportunity to reduce operating costs and potentially leverage a portion of the asset through low-interest debt.

The deal reminds that as managers help foster rapid evolution towards more resilient supply chains, the financial engineering underpinning build outs of controlled environment ag facilities may prove as important as the glass and steel.

“While we don’t need to own every facility that we grow out of, we certainly benefit from having one so close to our headquarters in Lexington,” AppHarvest president David Lee told Agri Investor.

“As we add technology and experiment with improving productivity, that will benefit all 12 of the facilities we’ve announced we are going to build ourselves by 2025.”

Lee – who joined AppHarvest in January after a five-year stint as chief financial officer at Impossible Foods – said the experience of raising $1.5 billion for that company from LPs that included Temasek, Khosla Ventures, Bill Gates and others demonstrated that high-growth companies need to focus on “ruthlessly” funding future growth, regardless of whether they are public or private.

Though AppHarvest may benefit from better financing terms on green bonds and ESG-linked instruments as that segment of the market develops, he added, its strategy does not assume such benefits. Early focus on return for invested capital, he explained, is among the management practices designed to help attract a variety of capital sources to AppHarvest’s wide-ranging future plans.

“When a company goes public, it can access all forms of capital – private capital, public capital, ESG capital, retail capital,” he said.

“The line has blurred on what you would call private capital and public capital with regard to high-tech growth investment. This is that. AppHarvest is a high-tech growth investment that benefits the world, it just happens to do it through great agriculture and food technology.”

As the most prominent company offering public investors exposure to a controlled environment ag market that has been propelled by some of the most potent trends in the modern economy, AppHarvest will continue to be watched closely.

Though progress toward ambitious targets for a network of physical greenhouse infrastructure will stand as the clearest gauge of its near-term success, the financial infrastructure connecting public and private markets, debt and equity structures, along with tech, ESG, ag and consumer-focused investors, that all form part of AppHarvest’s investor base, may prove to more significant over the long-term.