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The Story Behind Spartan Energy Is More Hype Than Substance

Good looking cars aren’t enough to justify SPAQ stock

Not that long ago, Tesla (NASDAQ:TSLA) was struggling to prove the concept of electric vehicles. Today, seemingly everyone wants to get in on the action. The latest to intrigue speculators is Fisker. Currently, the automaker is negotiating a merger deal with Spartan Energy (NYSE:SPAQ), a Special Purpose Acquisition Company (SPAC). Although SPACs have distinct risks, the EV momentum is such that many are piling into SPAQ stock regardless.

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To be fair, I can appreciate why Fisker has garnered so much attention. First, with TSLA shares launching into orbit, those who missed out on the ride are looking for the next big thing. That’s why you’re seeing so many EV makers, even ones that have no business trading, such as Ayro (NASDAQ:AYRO), make waves. Simply, it’s the flavor of the week.

However, SPAQ stock has a little more torque than some of its counterparts, which are pure gambles. And, I might add, not particularly smart ones. This leads me to my second point, which is the man behind the namesake. A legend in automotive design, Henrik Fisker has been the creative force that brought to life several iconic cars.

It’s here where SPAQ stock could distinguish itself, even from Tesla. While Tesla cars feature the clean-cut styling that has appealed to buyers, Fisker has made a living on truly eye-catching artistry. Arguably, Fisker’s Ocean SUV is a breath of fresh air, potentially representing a viable alternative to the Model Y.

It’s not just the styling aspect but the consumer accessibility. With a purchase price of $37,499 for the base model, the Ocean directly competes with Tesla’s Model Y, which starts at $42,690.

Best to Avoid the Hype on SPAQ Stock

Despite the raw appeal of Fisker’s design acumen, investors shouldn’t rely on their emotions to boost their portfolio. Instead, they should consider the company’s business viability. It’s here where the narrative for SPAQ stock falls short.

An immediate cautionary flag is that so many organizations are piling into the sector. While that bodes well for broader integration down the line, the transition to EVs isn’t going to happen overnight. In many ways, the EV craze reminds me of the technology stocks bubble of the late 1990s/early 2000s.

At that time, any corporation that had an idea would see their equity valuation skyrocket. Look what you have right now in the EV market. Outright copycats? Check. Niche alternatives? Check. Three-wheeled iterations? Check. One-person cars?! Check.

Logically, not all of these new competitors will enjoy the outsized performance of TSLA. Frankly, I haven’t seen enough to make me believe in SPAQ stock outside of its incredible hype machine.

As much as EVs epitomize the future of energy and transportation, you must be realistic. Moreover, in the near term, prospective buyers must consider the consumer economy impact from the novel coronavirus.

According to Statista.com, automotive experts believe that the number of cars sold worldwide will reach 59.5 million units. If so, this would be down nearly 21% from 2019 unit sales. Certainly, EV sales will decline as well.

In fact, you’re already seeing signs of that via vehicle deliveries from Tesla, easily the most dominant EV brand. Since the fourth quarter of 2018, deliveries have trended largely sideways. That’s not a knock on Tesla but rather, a reflection of consumer demand.

As we head toward the most challenging period of the crisis thus far, this isn’t the time to bet on unproven companies.

Beauty and Business May Not Always Mix

Although SPAQ stock is one of the most discussed investment opportunities today, before diving in, you should know that this isn’t Henrik Fisker’s first rodeo.

Several years ago, Fisker Automotive developed the Karma, one of the world’s first plug-in hybrid luxury vehicles. To this day, the Karma is a stunner. The designer himself says that he still drives it.

Unfortunately, you can’t say the equivalent about Fisker Automotive, which declared bankruptcy in 2013. This followed its battery supplier declaring bankruptcy in 2012.

Now, it’s true that the circumstances behind Fisker Automotive and the present Fisker are different. In addition, EV technology has improved dramatically since the Karma made its debut. However, this shows that having a compelling design doesn’t guarantee victory. Far from it.

Instead, you also need business smarts and a compelling brand. These are factors that have so far escaped Fisker’s foray into EVs. While that could change, investors are likely best served considering other options in the space.

Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2020/07/story-behind-spartan-energy-spaq-stock-more-hype/.

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