Mate Rimac says raising money this way for EV start-ups could harm the industry over the long term.

InsideEVs is not a financial website, and we'll be honest to say we really don't know very much about stocks or the stock market in general. However, we are aware of the SPAC craze, and we've heard on many occasions that it's not the best idea.

SPACs are all the rage these days, especially among EV startups. However, Tesla CEO Elon Musk, among others, has warned about them. Now, Rimac founder Mate Rimac provides his two cents.

 

For those unaware, SPAC is an acronym for "Special Purpose Acquisition Company." SPACs are also referred to as "blank check companies" or a "reverse merger." A SPAC is essentially a company with no official operations that's formed to raise money through an initial public offering (IPO) with the purpose of acquiring an existing company.

According to Reuters, managers of these SPACs don't get held to the same level of liability regarding future growth as those who raise funds via the more traditional (IPO) method. SPACs avoid the traditional IPO process and speed up fundraising efforts. They're easier to prepare and they don't have to deal with the large number of "legal hurdles" that come with an IPO.

Mate Rimac, speaking at the Financial Times Future of the Car summit said:

“You can get so much money now for companies that do not have a product. Personally, I am scared a little bit.

“When we go public, I want to show the numbers, to go public on reality, and not on hype."

“I hope that these SPACs will be successful. A lot of them won’t. I hope it won’t hurt the industry too much."

We've seen several examples of the SPAC situation lately. Nikola is the first that comes to mind, and that hasn't worked out very well for a number of reasons. Fisker has also jumped on board, and other EV startups, are considering taking advantage of a SPAC. Arrival, Canoo, and Lordstown Motors have followed the path as well. Even failing Faraday Future is working to find a SPAC deal. However, there are exceptions, such as Bollinger Motors that's working to raise $50 million, but has thus far avoided all offers from SPACs.

Meanwhile, EV companies like Tesla, NIO, and Xpeng went the traditional route, and all appear to be doing very well as far as the stock market is concerned. However, the huge difference here is these companies are already producing and selling compelling EVs.

If you're keen on investing, let us know your thoughts on this in the comment section below. We'd love to read a conversation that sheds more light on the subject.