El Segundo’s Navitas plans to show the system charger market the wrong way up with a $ 1 billion public providing – Simple Reader

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Story of Jake Safane

Photos by Philicia Endelman (PhiliciaEndelman.com)

GAllium Nitride Valley. The words don't quite have the same sound as Silicon Valley. But, as Gene Sheridan's Navitas Semiconductor is growing, gallium nitride (GaN) could be the next great combination of elements (gallium and nitrogen) to power the modern world.

The residents of Palos Verdes Estates founded Navitas together with Dan Kinzer in 2014. In the third quarter of this year, they plan to list their company on the stock exchange through a special acquisition company (SPAC). The public offering will value the company at over $ 1 billion. The transaction will raise over $ 350 million in capital to help Navitas grow beyond its core business of developing fast chargers for mobile devices.

At the end of 2019, Navitas wanted to raise $ 15 million and eventually raised over $ 50 million, thanks in part to pandemic-induced growth.

“Then we saw that the US stock market became more attractive to [companies going public]. With that in mind and the launch of our GaN for mobile chargers, we wanted to go faster, ”said Sheridan.

Gene Sheridan, CEO of Navitas Semiconductor. Photo by Philicia Endelman (PhiliciaEndelman.com)

Sheridan sees enormous potential for GaN in the development of three new markets: data centers, solar panels and electric vehicles.

“We thought if we could raise hundreds of millions of dollars, not just that $ 50 million, we could really step on the gas and become the next generation power chip company by bringing GaN to all of these other markets,” he explains .

The SPAC route

The company is leveraging a trending area of ​​finance by going public through a SPAC. In a traditional IPO, a company works with investment banks to bring first-time investors to the stock market to buy shares in the company. The company is then listed on a stock exchange so that the public can trade in stocks.

However, an increasingly popular way to go public is through SPACs. In the first quarter of 2021, there were 469 SPAC IPO filings, compared to 123 non-SPAC IPO filings, according to Deal Point Data.

SPACs work in reverse to traditional IPOs. They go public as a so-called blank check company, collect money from investors and list on stock exchanges, but have no operational business. They usually go public with the intention of merging with a private company. This means that the private company will be listed because the SPAC it merged with was already listed on a public exchange.

One benefit of a SPAC is that the process tends to be faster than the traditional IPO route. Another benefit is that the two merging companies will have time to discuss the deal in depth.

“With a traditional IPO, you go out and talk to a lot of investors. But it's usually an hour-long meeting where as much as possible can be packed into a public presentation that really can't address all of the company's confidential future plans, ”explains Sheridan. “Different rules apply to a SPAC-IPO. You can use an NDA (nondisclosure agreement) to exchange sensitive information not only about the technology but also about future plans. “

That confidentiality, combined with the highly technical nature of Navitas, made a SPAC more suitable, he says. “Because when I find investors who understand my business, they are better long-term investors, not short-term investors who hear a good story, but as soon as there is a bump in the way, they jump to the next interesting IPO.”

Rick Hendrix and Gary Wunderlich are co-founders / directors of Live Oak Merchant Partners – the parent company of Live Oak Acquisition Corp II, the SPAC, which is partnering with Navitas to take it public. they will join the Navitas Board of Directors.

“We have agreed longer lockups (the length of time an investor has to hold their shares) than usual in a SPAC merger because we see this as a long-term investment,” says Hendrix.

New sustainable markets

“Gallium nitride will become the backbone of power going forward, and we believe Navitas will lead this transition,” says Hendrix.

“Taking over $ 350 million in cash on the balance sheet and going public will cement the long-term staying power that your customers will perceive. At this point, they are no longer a young company. You are a high-growth, publicly traded company. This gives customers greater convenience when choosing long-term product designs. “

So far, much of Navitas' work has been in the consumer electronics market, using GaN to develop smaller, faster chargers for cell phones and laptops.

“We can use the same technology for these relatively low-performance applications and scale them up to much larger devices and higher performing applications, ”explains Sheridan.

He sees considerable potential for increasing the energy efficiency of data centers, which can be used for everything from cloud computing to mining cryptocurrencies.

“The data center is known to be a power hog,” says Sheridan. “The biggest cost factor for running a data center is electricity.”

“We supply the energy for data processing without burning it as heat, which is the case with inefficient power supplies,” says Sheridan. “That lowers the electricity costs and the cooling costs for a data center because you have less heat if you don't waste this energy.”

This type of efficiency can also be applied to extract more energy from solar panel systems and reduce their up-front costs, resulting in greater use of solar power.

Sheridan believes Navitas can also make electric vehicles (EVs) more attractive by speeding up charging times and increasing range.

“If you make the electronics in the car more energy efficient, you don't waste the energy by burning it into heat. They'll use that energy to keep the car moving, ”says Sheridan. “We believe that by using our chips we can increase the range of a car by at least 5 percent. Every 1 percent is hard to come by, and it's a big deal. “

By popularizing electric vehicles and solar energy, Navitas will contribute to the broader sustainability movement.

“We love this element of Navitas,” says Hendrix of Live Oak. “This is generally not how we start our investment process, but the fact that you can invest in a company that will help be part of the solution is a great thing.”

Melissa and Gene Sheridan at their home in Palos Verdes Estates.

International and yet local

The El Segundo-based company currently employs around 50 people in the South Bay and around 100 total. With capital from the IPO, Navitas plans to add hundreds of jobs over the next several years. This includes 50 to 100 additional South Bay employees in knowledge-based, corporate strategy-like roles.

“We see ourselves as a Californian company, but also very international,” says Sheridan.

Sheridan grew up in upstate New York but lived much of his life in the South Bay. He came to the area over 30 years ago to work for International Rectifier in El Segundo. After living in Manhattan Beach, Hermosa Beach, and El Segundo, he settled in Palos Verdes to raise a family.

“The green grass, the view of the sea, you are five minutes from the beach, but you have a lot more space, the parks, the school systems, it all comes together and it becomes heaven on earth. ” he says.

When he asked his two college-aged children (he also has two elementary school children) what they want to do for a living, they said what they need to do to stay in Palos Verdes.

“It's a great endorsement from the community and the reason people probably don't leave very often once they experience this wonderful life and work-life balance,” he says.

Sheridan credits Greater South Bay, with its tech talent, beach life, proximity to LAX, and legal and financial services, as a critical component of his company's success.

“The South Bay is a really rare mix,” he says. “I don't think there are many other churches in the world that can do that” [offer] that. It certainly went a big part in starting Navitas, making it bigger and now getting it to the point where we can really scale it up. ” PEN


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