(Bloomberg) -- Luminar Technologies Inc., the laser sensor startup that went public in a $3.4 billion reverse merger last year, is issuing half a billion dollars in convertible debt to fund share buybacks, a sign management sees the $5 billion startup as undervalued.
It's unusual for an early-stage company not expected to turn a profit until 2025 to spend money repurchasing stock -- a maneuver typically used by mature companies with extra cash on their balance sheets to bolster the share price. But Luminar's stock has been unfairly penalized by broader skepticism toward firms that listed via special purpose acquisition companies, Chief Executive Officer Austin Russell said in an interview Tuesday.
“The No. 1 reason is us being bucketed in with a bunch of other SPAC companies out there that are not nearly the same level of capability, quality,” he said. “We're really trying to break out of that as much as possible by continuing to execute and prove ourselves.”
Read more: SEC puts the brakes on SPAC-mania among EV makers
Luminar's shares climbed 2.5% to $15.04 at 1:23 p.m. in New York. They tumbled 57% this year through Monday's close.
Luminar said Tuesday it will buy back $250 million in common stock, with its CEO and other board members purchasing additional shares. The remainder of proceeds from the convertible notes, which can be converted to equity if Luminar shares reach a higher price target, will be used to speed growth, the company said in a statement.
Laser sensors, known as lidar, allow cars to “see” their surroundings, making them a critical component of some advanced self-driving features. Orlando, Florida-based Luminar is one of at least six companies in the market that have listed via SPAC, including Velodyne Lidar Inc. and Innoviz Technologies Ltd.
See also: With robotaxis still a dream, lidar makes itself useful
Luminar has pointed to high-profile deals as proof its winning significant business. Volvo Car AB tapped the company to make laser sensors standard on its flagship SUV due next year, while Luminar has also signed agreements with SAIC Motor Corp., China's biggest automaker, and Daimler Truck Holding AG.
The terms of the convertible notes are set to be disclosed later Tuesday. Russell, who said it's a “no-brainer” that Luminar's shares will be above $20 within five years, said the buyback will protect existing shareholders from being diluted.
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