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AppHarvest Founder & CEO on company's public debut via SPAC

Jonathan Webb, AppHarvest Founder & CEO joins the On the Move panel to discuss AppHarvest public debut through a SPAC.

Video Transcript


JULIE HYMAN: Well, we've got another SPAC deal to talk about today. They've become very popular as of late. AppHarvest is going to be combining with Novus. The estimated value when the deal closes will be about a billion dollars for the company. AppHarvest is an indoor farming company, so has massive greenhouses that raise things like tomatoes. Jonathan Webb, the founder and CEO, is joining us now from Morehead, Kentucky, from it looks like one of those greenhouses. Jonathan, thank you for joining us and congratulations on this deal.

I do want to ask, as I mentioned, it seems like we have seen more and higher profile special purpose acquisition company deals this year. Why did you decide to go this route, the SPAC route, versus say, an initial public offering or a direct listing?

JONATHAN WEBB: Well, first, thank you for having me. And the SPAC was just a vehicle and was a tool that we could utilize to be able to enter the public market fairly rapidly. Out of the $475 million this transaction will bring to the company, $375 million of that is through the pipe. So we did go through a traditional roadshow process. And a vast majority of the capital that's coming to the company is through a pipe. The SPAC itself was only $100 million.

So I know people talk about SPACs in different ways, but for us, it was a way for us to be able to go out to the institutional investors. Fidelity is one of the largest investors, or the largest investor in this round of capital. And again, they're a private investor institution that was able to come in this round alongside the SPAC. So it was just a vehicle for us to be able to raise the capital and we felt it was the right time.

Our board, who includes Jeff Ubben, David Lee, CFO at Impossible Foods, Martha Stewart, we have a world-class board and we wanted to as we're going to sell our fruits and vegetables later this year, will be at the largest grocers in the US, we want the consumer of that fruit and vegetable to be a buyer in our company and give them the opportunity to own our stock and buy into this company with us as we work to change agriculture here in America.

ADAM SHAPIRO: I got to tell you, I find all of this fascinating. I can remember doing stories 20 years ago in places like Chicago, where they were turning on a small scale, old factories into hydroponic centers to grow produce. But now you're doing this on a much larger scale. What's the potential market size for the produce you will be producing? Because I can't imagine you're ever going to, or correct me, replace California.

JONATHAN WEBB: Well, it's a great question. I don't think there's a choice of do we replace California. It's on fire. They're running out of water. And that's where we grow our food. It's not going to last. It's a house of cards. Produce imports from Mexico to the US have nearly tripled in the last 10 to 15 years. I was with Secretary Perdue earlier this year. Four billion pounds of tomatoes imported from Mexico into the US last year. That was almost 1.2 billion pounds 10 to 15 years ago.

When people say what's the market size, my background was building some of the largest solar projects in the US. I'm bringing that experience over to controlled ag, building facilities in agriculture. People talk about the market. I just try to say, in my lifetime, think about it like most power will eventually come from renewable resources. Most cars will run on electricity. And most food and fruits and vegetables grown at scale are going to be in a controlled environment.

We don't have a choice. You talk to farmers. The climate is rapidly changing. Drought, too much heat one year, not enough water, it's not going to last. And the UN Security Council was here in Kentucky with us a couple of months ago. The UN's predicted we need 50% to 70% more food on planet earth by 2050. Many are saying we would need two planet earths to have enough land and water to grow the food we currently grow.

So to your point, are we ever going to compete toe to toe with California? Well, we absolutely have to if we want to make sure America has food for our kids' future. It's our governor who's going to be with us again on October 21, we're opening our first facility here. This facility is larger, 2.8 million square feet, it's twice as large as Amazon's largest distribution center. This is a massive facility. It's all about scale.

JULIE HYMAN: And so, Jonathan.

JONATHAN WEBB: So again to your point with California, yeah, yeah.

JULIE HYMAN: No, I was just going to say, given scale, I want to know about costs of this. Both costs to you versus the outdoor methods of farming. And then also cost to the consumers. Because what you're talking about in terms of global warming and all that, costs are going to be going up for traditional agriculture. But how quickly? And how quickly are we going to see your cost model and that cost model converge?

JONATHAN WEBB: Yeah, that's a great question. So what we're working to do, is make sure that we're not raising prices for the everyday American. Our tomatoes are going to cost compete with the tomatoes that are at a grocery store right now. And we don't want to raise prices for the everyday American. But with that being said, the industry is not going to have a choice to continue to operate the way they're operating at the cost they see today. Prices are going to go up as we see climate disruption put more pressure on farms.

I'm sitting in the heart of coal country, eastern Kentucky. Why are we building in central Appalachia? Because we can get to 70% of the US in a day drive, have some of the record amount of rainfall in 2018. But when people ask me, well, how quickly can agriculture shift? Well, I'm standing in an area where you've seen just about every coal company go bankrupt in the last 10 years. And I can tell you as somebody who worked in energy, it happens fast. And we need to wake up.

Our governor sees this. He's going to be here with us in a couple of weeks. He was terrified in the middle of COVID, brought our team in when he realized the US is not self-sufficient. We do not produce our own food. We are heavily reliant on imports from Mexico. It is, this is not a 50, 60 year out thing. Agriculture is going to see technology and infrastructure. We're going to see billions of dollars flood into agriculture and rebuild US farming. We don't have a choice.

We've been very blessed with a lot of land and a lot of water, and for a century or more, it's gotten us to this point. But going forward, agriculture is going to see a lot of disruption, going to see a lot of technology come in. And COVID has really forced the hand to make sure that we strengthen our supply lines so that we're never in this situation again where grocers are questioning whether or not we're going to have good fresh produce on store shelves.

JULIE HYMAN: Jonathan, I would love to have you back to talk much more about this. And I would love to come and visit you also, once we all can be doing that again, because this, as Adam said, this is fascinating stuff. Jonathan Webb is AppHarvest founder and CEO. Thank you.

JONATHAN WEBB: Come anytime. You're welcome. You see him standing in the facility. We're doing this interview in a facility. Keep in mind the gag laws in the US that don't let cameras on farms, and keep in mind you can't take cameras on farms down in Mexico. We're flipping the script. You're welcome here anytime. Bring your camera crew, we'd love to host you.

JULIE HYMAN: Thank you, Jonathan, appreciate it.