Bad Tomatoes at SPAC’s Indoor Farm Empire Send Shares Tumbling

(Bloomberg) -- AppHarvest Inc.’s early efforts at indoor farming aren’t bearing financial fruit for shareholders of the SPAC that bought the startup in February.

The stock tumbled as much as 40% on Wednesday to as little as $7.20, well below the typical $10 starting point for “special-purpose acquisition companies,” after a disappointing second-quarter report. The recent crop at AppHarvest’s first facility in Kentucky was marred by historically low tomato prices, and sales were hurt by lower-than-expected quality, the company said.

Production was slowed by the training and development of the new workforce, and rising costs included higher distribution and shipping fees. All told, Morehead, Kentucky-based AppHarvest posted a $32 million net loss, cut the range for its full-year sales guidance by more than half and said its adjusted Ebitda loss could be as much as $75 million, up from a prior maximum of $52 million.

AppHarvest plans to grow tomatoes, berries and leafy greens in a network of 12 massive, high-tech indoor farms that it says will eschew pesticides, produce higher yields and use less water than conventional farms. The stock debuted in February after a reverse merger with a SPAC called Novus Capital, and the board of directors includes home decor guru Martha Stewart and activist investor Jeffrey Ubben.

SPACs, also known as blank-check companies, are shells that raise money by going public with a goal of finding and buying an existing business, effectively allowing it to go public without all the usual scrutiny that precedes an IPO. Investor enthusiasm has been waning since February as returns faltered and regulators stepped up monitoring of SPACs, amid concern that shareholders weren’t being fully informed about risky startups that some SPACs are buying.

AppHarvest’s first-ever crop -- beefsteak tomatoes -- was rolled out at grocery stores earlier this year. Martha Stewart showed pictures of her sampling them in a blog post, noting that they were grown with 100% recycled rainwater.

Read More: AppHarvest Falls After Reporting Loss & Lowering FY Forecast

“We are disappointed with these results,” President David Lee said during an earnings conference call. “But the good news is that prevailing market prices for tomatoes have already rebounded from the lows we experienced in the second quarter.” Glitches with a harvester have been fixed and the company brought in new managers to improve operations, he said, and AppHarvest reaffirmed its targets for 2025.

©2021 Bloomberg L.P.