David Hall, the founder of leading lidar manufacturer Velodyne, is going to war with the SPAC that acquired his company. In a letter, Hall is calling for the resignation of two of the company’s SPAC-appointed board directors, whom he blames for Velodyne’s “poor financial performance.”
It’s the latest twist in the increasingly dramatic saga of Velodyne, a top maker of the laser sensors that are viewed as crucial for the operation of autonomous vehicles. Last month, Hall was ousted as chair of the company’s board, and his wife, Marta Thoma Hall, was removed as its chief marketing officer. The board cited an investigation into “inappropriate behavior” by both Halls in its justification for their removal. Marta Hall remains a member of Velodyne’s board of directors, while David Hall resigned his position on March 2nd.
Now, David Hall is striking back by directly challenging the special purpose acquisition company, Graf Industrial Corp, that merged with Velodyne last summer. He is calling for the ouster of two of the SPAC’s chosen board members, Michael Dee and Christopher Thomas, and their replacement with an “independent” member of his own choosing.
“I will not stand idly by and watch the Board squander Velodyne Lidar’s bright future”
“I will not stand idly by and watch the board squander Velodyne Lidar’s bright future with what I believe is a lack of strategic focus and poor corporate governance,” Hall writes.
Hall accuses the board of making several questionable moves in recent months, including padding Velodyne CEO Anand Gopalan’s compensation “despite knowing the company would miss its 2020 projections.” He also claims that he and his wife were censured by the board “based on an opaque, secret investigation into frivolous claims.” Hall claims he was removed as chairman and his wife’s position was terminated “without reasonable justification.”
“This seemingly retaliatory move followed our attempt to hold Dr. Gopalan more accountable for the company’s weak performance and reconstitute the board with more experienced and highly-qualified public company directors,” Hall writes.
What’s a SPAC?
A SPAC is a special purpose acquisition company — basically, a pile of cash reserved for a merger that went through the initial public offering (IPO) process. The entire point of the SPAC is to find a private company to merge with. When that happens, the target company essentially goes public without some of the hassles of the traditional IPO process.
There has been a lot more SPAC action than usual lately; The Wall Street Journal even declared 2020 a record year for SPACs. Companies such as Virgin Atlantic, Opendoor, Lordstown Motors, and Fisker have all gone through the process. For a more detailed explanation of how SPACS differ from IPOs, see our SPAC explainer.
Hall has long been revered in the world of autonomous vehicle technology as a pioneer in the use of laser sensors to enable AVs to “see” the world around them. Lidar, which stands for “light detection and ranging,” uses thousands of laser beams to sense objects and measure their distance. The cone- or cylindrical-shaped sensor perched on the roof of a vehicle has become synonymous with self-driving cars.
Ford was an early backer of Velodyne, investing $150 million in the company in 2017 along with Baidu, the Chinese search giant. Ford contributed $75 million of that total and held 13.1 million shares in the company. The automaker dissolved its stake in the lidar company earlier this month but noted that it would continue to use Velodyne’s sensors on some of its autonomous vehicles.
Hall stepped down as CEO of Velodyne in January 2020, replaced by Gopalan, the company’s chief technology officer. But Hall remained executive chairman of the board, steering the company’s major financial decisions.
In June 2020, Velodyne struck a deal with “blank check” company Graf Industrial Corp, with a market value of $1.8 billion. It was part of a wave of companies in the transportation technology space choosing to go public via SPAC and thus avoid a lot of the scrutiny that comes with a more traditional IPO.
Hall’s move highlights a larger issue facing many similar SPAC deals
Nearly a year later, that deal is starting to show strain. In his letter, Hall excoriates Dee and Thomas as inexperienced and unqualified. He points out that Dee’s other company, advanced recycling firm PureCycle, is itself embroiled in litigation related to his role as chief financial officer following its merger with a SPAC “with disastrous results.” Meanwhile, Thomas’ board position was changed so he wouldn’t face reelection until 2022, which Hall alleges was a move to “entrench” him for another year.
Hall’s move to strike back at Velodyne’s new parent company highlights a larger issue facing many similar SPAC deals across the industry: the question of controlling interest in the company. Hall says he owns 98,951,541 shares in Velodyne, or roughly 52 percent of the outstanding common stock, which gives him enough voting power to replace Dee and Thomas with a new board director. Hall is nominating Eric Singer, founder and managing member of VIEX Capital Advisors, for that position.
“In our view, the status quo at Velodyne Lidar is unacceptable,” Hall says. “Poor leadership and weak financial performance are not a recipe for success in the public markets. Stockholders deserve a Board that is committed to honoring its fiduciary duties and focusing on value creation.”
A spokesperson for Velodyne did not immediately respond to a request for comment.
Update May 25th, 1:35PM ET: David Hall resigned his position as a member of Velodyne’s board on March 2nd. A previous version of this story incorrectly stated that Hall was still a board member.