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Chamath Palihapitiya's SPAC for Sunlight Financial is another sign of a renewables boom

Jonathan Shieber
·3-min read
SAN FRANCISCO, CA - OCTOBER 19: Founder/CEO of Social Capital, Chamath Palihapitiya, speaks onstage during "The State of the Valley: Where’s the Juice?" at the Vanity Fair New Establishment Summit at Yerba Buena Center for the Arts on October 19, 2016 in San Francisco, California. (Photo by Michael Kovac/Getty Images for Vanity Fair)

Former Facebook employee and current enfant terrible of high finance Chamath Palihapitiya is making news again with a $1.3 billion twofer SPAC and PIPE deal into the solar energy financing company, Sunlight Financial.

Sunlight Financial is essentially a lending company that gives solar installers a way to provide loans to homeowners to finance solar power and battery installations and other home improvement projects.

While it may be another indication of the Roaring '20s come back to haunt global financial markets in the lead-up to a catastrophic meltdown of the global financial system, there's at least some method to the madness with Sunlight.

That's because there's a lot of tailwinds behind a business that's lending money to provide better access to solar power, energy storage and energy efficiency upgrades.

The investment, alongside Coatue, Franklin Templeton and BlackRock, will value the lender at $1.3 billion. A healthy figure, but one that's not astronomical, especially given the $705 million in financing that Sunlight Financial has raised over its history, according to Crunchbase.

As Alex Wilhelm noted earlier today, Sunlight Financial would have likely tapped public markets sooner or later, given a pretty solid financial performance -- even during the pandemic:

Looking at the numbers, it’s somewhat clear that the company could have gone public in a year or two; another year’s growth, and it would have had enough revenue to pursue a traditional debut. Via this SPAC-led deal it will get out sooner and have more cash while it scales. Perhaps that is the value of the SPAC here for Sunlight.

Sunlight also has the benefit of being a publicly traded renewable energy play at a time when those companies are in short supply and high demand from institutional investors.

Over the course of 2020, big money moved to find ways to support businesses that can help mitigate the effects of climate change or slow the rapidly warming temperatures on the planet.

“Industry commitments to mitigate climate change risk is providing investors with visibility that there is momentum among decision-makers to drive change,” said Richard Manley, the managing director and head of sustainable investing at CPP Investments, in an interview last year. “There’s an appreciation within the public markets that the exciting transition solutions either within core operating subsidiaries or investments in the VC arms of corporate companies haven’t provided public equity investors the really focused opportunities they’ve wanted.”

With the launch of Palihapitiya's latest SPAC, that trend seems set to continue in 2021. As Rob Day, a longtime investor in climate tech wrote in a direct message late last year:

“[The] current wave [of SPACs] is because over the past 24 months the institutional investor universe has come fully into believing that climate solutions are going to be a major growth area in the 2020s and beyond, but they weren’t seeing options available to them for investing into,” according to Day.

“The available publicly traded ‘green’ companies were already getting really bought up, and the private equity options were underwhelming as well (smallish in the case of VC, low returns in the case of large-format projects). Throw in a Robinhood market of retail investors with a lot of enthusiasm for EVs and such, and you have a nice recipe for this to happen.”