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Agtech company AppHarvest goes public

Yahoo Finance’s Alexis Christoforous and Jonathan Webb, AppHarvest Founder & CEO, discuss the company’s going public via a SPAC.

Video Transcript

ALEXIS CHRISTOFOROUS: AppHarvest is the latest company to go public through a SPAC reverse merger. The deal with the blank check company Nobis values the startup greenhouse farming company at more than a billion dollars, and early investors include Martha Stewart and author JD Vance. The stock is trading on the NASDAQ under the symbol APPH. It's being well-received by investors hungry for corporate stories that include any hint of sustainability, and there you see the stock up 16% right now.

Joining us for more is the founder and CEO of AppHarvest, Jonathan Webb, who is standing there in the middle of an indoor greenhouse there in Morehead, Kentucky. Jonathan, good to see you. We had you on just a couple weeks ago when you had your first harvest of beefsteak tomatoes and you were shipping them to some of your retailers, including Walmart and Kroger. You raised more than $475 million from this transaction. What are you gonna use that money for?

JONATHAN WEBB: We're using to build. My background is building some of the largest solar projects in the US, and I'm moving from the energy world to agriculture. And AppHarvest is founded to build some of the world's largest controlled-environment agriculture facilities. And we're doing it we're here in central Appalachia.

I mentioned to you last time, you know, this region we can get to 70% of the US in a one-day drive, and we have abundant rainfall. So if you look at a fruit and vegetable, 95% of it is water. We're able to package that rainwater up here, run completely on recycled rainwater, and then send the fruit and vegetable out to major markets here in the East Coast, Midwest, and Southeast. So we're excited to hit the NASDAQ today, but it's just the start for us. We have a couple of decades ahead of us to help rebuild the food system not only in the US, but around the world.

ALEXIS CHRISTOFOROUS: Talk to me about the cost of ramping up and bringing the business to scale. You've certainly got a nice chunk of money now to do that. But what are your costs like going forward?

JONATHAN WEBB: Yeah, so we're gonna be spending a tremendous amount of capital on building. So, you know, I'm standing in this facility. It's not a backdrop. You know, this is where we grow our fruits and vegetables.

And we're building. We're building a lot. We've set out to build nearly 12 facilities by 2025. And to give the scale of this, we built this first facility in the middle of the global pandemic. We had 600 semi trucks of materials that had to be delivered to us in Morehead, Kentucky, in the 2.8-million-square-foot structure. That's one of the largest structures in the world.

So we're building big stuff and building fast in order to be able to grow a fruit and vegetable where-- you look where the grocer demand is. You know, the grocers want US supply. You know, they want it in a controlled environment so they don't have to worry about climate disruption. Consumers don't want the harsh chemical pesticides. We don't use any harsh chemicals. And we can do it with 90% less water and get 30 times more yield per acre. So my job here on the ground is to build the big stuff fast. And we're gonna be pushing out this capital here on the ground to get the infrastructure and technology up around our region.

ALEXIS CHRISTOFOROUS: So Jonathan, that's clearly where the focus is right now. Any focus on when are you gonna turn a profit? And can you offer up any kind of a timeline to investors?

JONATHAN WEBB: Well, every facility, we've modeled it out to Island-- to be able to be profitable based on its own operating needs. And, you know, we're focused on getting each facility to profitability. But we're competing, you know, with agriculture products that are being shipped in from out of the US. You look at tomatoes. 4 billion pounds of tomatoes were shipped in the US from Mexico last year. And we want to make sure we're getting the fruit and vegetable the consumer at or around the same price.

So we've built a model that gets us to profitability while competing with dirty agriculture products that are being shipped, you know, two weeks on a truck. They're laden in heavy chemical pesticides. You look at the USDA, who recently did a study on cherry tomatoes, said 80% of tomatoes had at least one harsh chemical, and up to 20% of tomatoes had up to five harsh chemicals. So it's a premium product at conventional pricing.

And you mentioned some of our early investors. We're very fortunate. You know, we've tried to say not all SPAC deals are equal, and we're one of those where the SPAC was only $100 million. You know, we did a road show and raised $375 million with private investors. Fidelity led the pipe, was our largest investor-- very sophisticated investors that have invested in this company with us and are in it for the long run. So again, we're excited to hit the NASDAQ today. But, you know, for us, this is just the start and the beginning of a very long journey.

ALEXIS CHRISTOFOROUS: And, you know, the cost of organic produce was quite high when it first hit the market. I think that spread between organic and nonorganic has narrowed a bit, but it is still a premium product. What is the cost analysis for the consumer? How much more are we gonna spend for your tomato-- or eventually your pepper or cucumber-- than we do for regular?

JONATHAN WEBB: Well, so Martha Stewart's on our board. I'll be talking to Martha again later today. She's been very active with our company. You know, we have a mission to create a much better product that doesn't have the harsh chemicals, better flavor, higher nutrient density, but at the same price. We understand that the average American consumer cannot afford to pay for more at the grocery.

And we can do that simply with a couple of reasons. One, economies of scale-- we're building really big, which allows our operating costs to be lower. We're operating in a region where we can run completely on recycled rainwater. So when I mentioned 95% of a fruit and vegetable is water, we control those costs by running completely on recycled rainwater.

And then lastly, distribution-- again, getting that trucking time down from two weeks to one day. And you look in the US right now. Almost 40% of fresh fruit and vegetables end up in a landfill. It's unacceptable. So by us being able to grow lower-- closer to markets, we get that food waste number down. All of this transfers into a price per pound on the fruit and vegetable, and we very much want to be competitive with current pricing so that we're not raising prices for consumers at the grocery store.

ALEXIS CHRISTOFOROUS: OK, we're gonna watch as you continue to build out the business there. Jonathan Webb, founder and CEO of AppHarvest. Congratulations on the SPAC IPO today.

JONATHAN WEBB: Thank you for having me.