Japanese Recycling Upstart Tests Waters With SPAC Debut on NYSE

Min Jeong Lee and Bailey Lipschultz
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(Bloomberg) -- A small Japanese plastic recycling company is gearing up to go public in the US through a SPAC merger this month, even as many IPO hopefuls are delaying or scrapping such plans.

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Kawasaki-based Jeplan Inc. plans to merge with special purpose acquisition company AP Acquisition Corp. to debut on the New York Stock Exchange in coming weeks. If the deal moves forward, it would value Jeplan at around $300 million and the merged entity at an estimated $429 million, assuming no additional equity financing or redemptions by AP Acquisition’s investors.

Public listings via SPAC mergers are under heightened investor scrutiny, as redemption rates climb well above 90%. But Jeplan thinks the risk worthwhile. Listing on the NYSE will allow it to access capital from a wider base of investors, enhance its brand and attract additional talent needed to drive further growth, the company said.

“This buys us time,” Jeplan Chief Executive Officer Masaki Takao said in an interview.

Founded in 2007, Jeplan develops what is known as chemical recycling, which in theory would make PET bottles reusable millions of times over. Its technology breaks down used plastic to near-virgin resin with only one part per million residual metal, according to the company. Jeplan holds a mere 3% to 5% of the global chemical recycling market, according to market research firm Imarc Group.

Jeplan now has a contract with Japanese beverage firm Asahi Group Holdings Ltd., which has begun adopting Jeplan’s tech to recycle PET bottles retrieved from about 30,000 vending machines in Tokyo, with plans to expand in other parts of the country. Proceeds from the listing would help boost the company’s research and development and expand capacity to recycle bigger volumes.

Over the past year, however, US SPAC merger have seen an average of roughly 94% of shares swapped for cash, according to SPAC Research data analyzed by Bloomberg. More than 300 SPACs have been liquidated since November 2022, data from SPAC Research show, while those that are still operating have seen the vast majority of investors bail.

“Any company merging with a SPAC has to know that the money in trust that will stay there through the deal is really low,” said Jay Ritter, a University of Florida professor who tracks new stock issues. “Unless this company gets lucky — and it might — there probably won’t be a whole lot of cash delivered from the cash trust.”

Japanese hoverbike maker Aerwins Technology Inc. debuted on the Nasdaq through a SPAC merger last year, only for its Japan unit A.L.I. Technologies Inc. to file for bankruptcy just ten months later. Even discounting the SPAC factor, post-IPO success has been elusive for Japanese companies venturing abroad. Of the six Japanese companies that debuted on the Nasdaq over the past year, all are trading below their initial public offering prices.

Now, with Japan’s benchmark Nikkei 225 Stock Average’s topping its historic 1989 high, appetite to go public overseas may flag in the months ahead.

Sponsored by Japanese private equity firm Advantage Partners, AP Acquisition was launched two years ago to merge with a company in de-carbonization or renewable energy. The deal with Jeplan comes after the blank check firm’s had to postpone its merger deadlines twice so far.

“We want to be fast in raising money, fast in going public,” said AP Acquisition’s Chief Executive Officer Keiichi Suzuki. “That way, the company can expand its business and win licensing deals from many different places ahead of others.”

--With assistance from Grace Huang.

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