Amazon continues to buy autonomous driving: it invests in the originator of lidar, and its stock price soars!

On February 8, local time in the United States, Velodyne, the pioneer of lidar listed on the U.S. stock market, announced that it agreed to issue warrants to Amazon.com NV Investment Holdings LLC, a wholly-owned subsidiary of Amazon, to purchase up to 39.6 million shares. Currently, Velodyne's total share capital is 196 million shares.

Influenced by this news, Velodyne, whose stock price hit a record low of $3.13 on January 24, surged more than 50% before the market opened and nearly 30% during the day, but closed up only 7.16% at $4.04. Velodyne's trading volume that day was 88.13 million shares, with a turnover rate of 44.862%, far higher than the average trading volume of 3.7 million shares in the previous 65 sessions.

Amazon and Velodyne's warrant transaction, the vesting of the warrant shares is based on discretionary payments made by Amazon under existing commercial agreements related to the use of Velodyne technology. This transaction is consistent with the June 2021 Amazon and PlusAI warrant transaction, both of which are through the binding of business and equity.

Amazon's investment in Velodyne is another major move in the field of autonomous driving, following its investment in Aurora in February 2019, its acquisition of Zoox for over $1 billion in June 2020, and its cooperation with PlusAI in June 2021. This means that Amazon continues to make layouts and purchase autonomous driving. According to information from Che Zhijun, there is still a huge amount of capital in China that is currently purchasing autonomous driving.

It is worth mentioning that Amazon has placed an order for 100,000 electric vans with Rivian, a company that has invested heavily in electric vehicles. Amazon's layout in unmanned warehousing and logistics will be further improved with the advancement of the above investment cooperation. In addition to meeting Amazon's strategic demands, investment in electrification and autonomous driving may also bring rich returns to Amazon.

01 Amazon chooses LiDAR autonomous driving route

For fully autonomous driving, or L4 and above autonomous driving, the mainstream technical solutions are pure vision technology solutions led by Tesla and lidar technology solutions led by Waymo. Globally, it seems that only Tesla insists on claiming that it can achieve fully autonomous driving through pure vision, while most players are using lidar solutions.

By investing in Velodyne, the originator of LiDAR, it can be considered that Amazon also prefers LiDAR's fully autonomous driving technology solution. After all, Aurora, which it previously invested in, Zoox, which it acquired, and Plus.ai, which it has a strategic partnership with, all use LiDAR's technology solutions.

For Amazon, Rivian, in which it has a large stake, can provide electric vans, and the acquired Zoox can provide the urban road autonomous driving technology needed for electric vans. After all, Zoox's goal is to build Robotaxi, and the scenarios of Robotaxi and electric vans are similar, and the difficulty coefficient may be slightly lower. After all, carrying goods does not require considering the riding comfort of the object more than carrying people.

The cooperation with Plus.ai is obviously to meet Amazon's demand for autonomous driving in trunk logistics. In the cooperation with Plus.ai, the basis for the redemption of the warrants is also Amazon's purchase of 10,000 sets of Plus.ai's heavy-duty autonomous driving systems. Trunk logistics is an important part of Amazon's unmanned warehousing logistics, which is why Amazon wants to cooperate with Plus.ai.

With the support of lidar technology, Amazon can stand on the shoulders of its predecessors in the field of autonomous driving and implement an unmanned warehousing and logistics strategy in a short period of time. This is crucial for Amazon, an e-commerce platform.

02 Amazon plays with warrants

The warrant agreement signed by Amazon and Velodyne allows for the subscription of up to 39.6 million shares, which is approximately 20% of Velodyne's existing share capital of 196 million shares. This is similar to the warrant agreement between Amazon and Plus.ai, which states that after Amazon completes the purchase of 10,000 Plus.ai autonomous driving systems, it has the right to purchase 20% of Plus.ai's equity at a certain price.

In other words, Amazon has mastered the use of warrants. For Amazon, warrants allow it to understand the development of partner companies better than other financial investors, including technology, business, team and other aspects, based on business cooperation. The existence of warrants is a tool for Amazon to amplify its own value. For cooperating startups, it is rare to have a financial sponsor with business and funds.

In Amazon's autonomous driving layout, Amazon only holds 5.2% of Aurora's shares. After Aurora merged with Uber's autonomous driving division Uber ATG, Uber's shareholding was 20%, higher than Amazon. Aurora's development direction is to be a platform-based autonomous driving company, and it will also engage in passenger car autonomous driving and commercial vehicle autonomous driving to meet the needs of shareholders and strategic partners Uber, PACCAR and Volvo Group.

The strategic importance of unmanned and electrified logistics to Amazon is unquestionable. Therefore, Aurora, in which Amazon holds only 5.2% of the shares, cannot meet its needs. This is why Amazon later spent more than $1 billion to acquire Zoox, signed a strategic cooperation agreement with PlusAI, and now wants to invest in Velodyne, a lidar company. What will Amazon do next?

For Amazon, the autonomous driving vehicle platform is an issue that must be considered. Only the autonomous driving algorithm + autonomous driving vehicle platform can truly commercialize autonomous driving. Rivian can solve the demand for electric box trucks, so Amazon needs new partners to provide heavy trucks for trunk logistics, especially electric heavy trucks. See, isn't there a new entrepreneurial opportunity?

For Amazon, investing heavily in Rivian has brought huge profits, which directly led to the excellent financial report in the fourth quarter of 2021. After the release of this financial report, Amazon's stock price soared 16% in a single day. For a company with a market value of more than 1.6 trillion US dollars, such an increase is astonishing.

After tasting the sweet returns from investing in the electric car company Rivian, Amazon now has a template for its autonomous driving actions and sufficient ammunition.