Yet another clean energy SPAC: Solar financier Sunlight lists on the New York Stock Exchange

Shares of Sunlight Financial, the No. 2 provider of loans for residential solar in the U.S., began trading on the New York Stock Exchange on Monday, joining a growing roster of clean energy companies that have gone public in recent months.

Like many of its peers, Sunlight went public by joining with an entity specifically designed to carry out such a transaction. ​“Special-purpose acquisition companies” (SPACs) raise money through public offerings before joining with private companies such as Sunlight, and they’ve become an omnipresent trend in the frothy clean energy market.

Last week, concentrated solar company Heliogen said it plans to SPAC, with expectations of being able to raise its valuation to $2 billion. In recent months, clean technology companies such as Eos, ChargePoint, EVgo, Stem, Proterra and Solid Power have gone public via a SPAC deal or announced their intention to do so. Overall, nearly 300 companies have filed to go public via SPAC in 2021, according to data kept by SPACInsider.

Sunlight will merge with Spartan Acquisition Corp. II, a SPAC sponsored by New York-headquartered investment firm Apollo Global Management. The deal is expected to bump Sunlight’s valuation to $1.3 billion.

The eye-popping increase in SPACs has directed significant funding into clean energy, an asset class that’s garnering increasing interest from investors. But the rapid uptick in the prevalence of SPACs has also led numerous industry watchers to hypothesize that the bubble will soon burst. The speculation has been based in part on the fact that some clean energy startups that have gone public via SPAC also have limited track records of financial or commercial achievement.

But ​“Sunlight isn’t the typical company that SPACs,” according to Bryan White, a solar analyst at energy consultancy Wood Mackenzie.

“If you look at some of the energy storage players or [electric vehicle] players, a lot of them have almost no revenue, if any,” he said. Sunlight, however, has already established itself as a ​“very proven business.”

It’s the second-largest provider of loans for home solar systems, behind only GoodLeap (formerly Loanpal). In addition to funding more than $4 billion in home solar loans since mid-2016, Sunlight expects to exceed $120 million in annual revenue this year.

Matt Potere, the company’s CEO, said he sees increasing quality among companies pursuing SPACs.

“What we heard pretty consistently from investors is they’re becoming much more discerning about companies that are going public through SPACs,” he told Canary Media.

Loans have become the predominant form of funding for home solar systems in recent years, currently representing about 60 percent of solar sales. Interest in loans accelerated throughout the pandemic, and most customers continued to pay back their solar loans even as the economy was smarting, allowing solar loan portfolios to perform well. In the coming years, the loan market is expected to outpace the growth of the overall residential solar market, according to Wood Mackenzie.

Bloomberg expects the home solar market to be worth $35 billion between 2021 and 2025, a timeframe in which the research firm forecasts the residential industry will add nearly 24 gigawatts.

Sunlight’s SPAC provides further indication that the market is primed for growth, according to White.

“It’s a sign of maturity. I think it’s a sign of what’s to come this decade, and even sooner than that, which is just a lot of money being thrown at this industry due to its growth prospects,” he said.

Sunlight may not be the only public loan provider for long. Its largest competitor, GoodLeap, is reported to be planning an initial public offering this year.

(Photo by Bill Mead/Unsplash)