Cepton, Inc., a Silicon Valley innovator and leader in high performance lidar solutions, announced that it has entered into a binding investment agreement dated October 27, 2022 (Investment Agreement) for a $100 million investment from its long-term automotive Tier 1 partner and current shareholder, Koito Manufacturing Co., Ltd. (Koito) (TSE: 7276).
What are the specifics of the transaction?
As initially reported, the investment will be used to fund Cepton’s next stage of growth as it scales its lidar solutions for mass deployment. Under the terms of the Investment Agreement, which has been unanimously approved by Cepton’s board of directors, Koito will purchase $100m of convertible preferred stock, with a purchase price of $1,000 per share.
The Preferred Stock will be convertible, beginning on the first anniversary of the issue date, into shares of Cepton’s common stock at an approximately initial conversion price of $2.585 per share, representing a 10.0% premium to Cepton’s volume-weighted average price over the trailing 20 trading day period ending on October 26, 2022.
The initial conversion price also represents a 13.4% premium to Cepton’s closing price on October 26, 2022 and a 7.0% premium to Cepton’s average closing price over the past five trading days. At Cepton’s election, the Preferred Stock carries a 4.250% per annum dividend if paid in kind or a 3.250% pa dividend if paid in cash, in each case paid quarterly in arrears.
Dating back to 2017, Cepton and Koito have a strong history of collaboration, and this marks Koito’s third investment in Cepton since 2020. As a direct result of their partnership, Cepton and Koito were awarded the industry’s largest known ADAS lidar series production award.
Consummation of the investment is subject to, among other things, the approval of Cepton’s shareholders and satisfaction of applicable closing conditions. The investment is expected to close in the first quarter of 2023. More information regarding the investment and key terms of the Preferred Stock will be included in a Form 8-K to be filed by Cepton with the SEC.
What were the executives’ thoughts on the funding?
“We are excited to further strengthen our partnership with Koito and remain deeply grateful for Koito’s continued support. This investment solidifies Cepton’s financial position, and allows us to continue our execution excellence as we focus on commercialization and mass market deployment of our lidar sensors,” said Dr. Jun Pei, Cepton’s Co-Founder and CEO.
“We are pleased to announce our third investment in Cepton as we work towards developing and commercializing next-generation automotive sensor technologies. Our partnership has developed over the years and Cepton remains a critical partner for us. This investment serves as a testament to our commitment towards Cepton and bringing lidar-based ADAS and AV systems to everyday vehicles,” commented Mr. Michiaki Kato, Koito’s President.
ICR Capital LLC is serving as exclusive financial advisor to Cepton and O’Melveny & Myers LLP is serving as legal counsel to Cepton. SMBC Nikko is serving as financial advisor to Koito and Davis Polk & Wardwell LLP and Nishimura & Asahi are serving as legal counsel to Koito.