At first glance, Spartan Energy Acquisition Corp. (NYSE:SPAQ) looks like a fit for the times. No, it’s not a play for a novel coronavirus treatment. But it is tied to transportation and cutting-edge technology. Thus, shares of SPAQ stock are enjoying increased interest.
Does a shell public company merging with an electric-vehicle hopeful warrant some of your hard-earned money?
That all depends on your comfort with risk amid an uncertain global economy.
Here are three reasons why SPAQ stock is getting attention:
- A connection to development of an electric vehicle.
- An emphasis on sustainability.
- Formation through a special purpose acquisition company, or SPAC.
SPAQ Stock and SPAC
Dozens of companies have gone public via SPACs as Spartan Energy and Fisker intend to do.
Instead of conducting a traditional initial public offering, a SPAC deal utilizes a shell company that raises money and merges with a private firm wanting to go public. Spartan Energy plans to join with Fisker through a reverse merger.
I’m spending time on this mechanism to try to limit confusion with “SPAC” the process and “SPAQ” the stock ticker for Spartan Energy. The similarity between these four-letter words makes the Spartan Energy-Fisker story more complicated at first.
Moving on, use of a special purpose acquisition company has become a popular way for companies to “go public.” More than 50 chose this route just this year. We’ll see if its popularity is a fad or if it takes deeper root in equity circles. Regardless, it has garnered a higher profile in 2020.
Electric Vehicle Connection
There’s no question that development of electric vehicles is a hot initiative. Riding the innovation wave created by Tesla (NASDAQ:TSLA), several small companies around the globe are working feverishly enter this emerging sector.
Fisker’s entry is named the Ocean. Like plenty of other EV entries, the Ocean is a sport-utility vehicle.
However, unlike Tesla and others, Fisker intends to only design and market its vehicles. The company wants to forge an agreement to outsource the nitty gritty “making” part with an established manufacturer. This will avoid having to create and build an assembly process. There are reports that Fisker wants to team with German-based automaker Volkswagen (OTCMKTS:VWAGY).
At this point, Fisker hopes to be building its Ocean SUVs in 2022. Although this puts it years behind other EV makers, the company could make up some time if it inks a manufacturing deal with a company like Volkswagen.
An Emphasis on Sustainability
As several companies develop electric-powered vehicles, the successful ones will identify and then exploit a niche that sets them apart. One of Fisker’s goals is to make the Ocean one of the most Earth-friendly electric vehicles on the market.
Fisker proclaims the Ocean to be the most sustainable vehicle in the world.
How you ask?
Good question. Behind Fisker’s claim is the company’s dedication to using recycled bottles and other plastics to make its SUVs. No leather seats here, either. And there’s more than the reuse of plastics. Other recycled materials include pieces of tires.
If this focus holds, and the supply chain can be directed to be efficient and cost-effective, then the Ocean will have made its unique spot.
Couple this with the well-known environmental benefits of an electric vehicle and the Ocean would seem to be poised to be a popular alternative in this segment of alternative vehicles.
The Bottom Line
Potential investors interested in the EV segment must decide if SPAQ stock is for them.
Negatives to consider must include Fisker’s somewhat checkered past financially and its inability – so far – to reach a manufacturing agreement with Volkswagen (or another establish automaker).
On the positive tally, a deal with Volkswagen would appear to supercharge Fisker in its years-long effort to make it to the main stage. Timing also is key, as global interest in EVs is growing. Consumers are increasingly open to these vehicles, especially as battery improvements keep coming. Fisker’s push to use recycled materials also will be a plus.
SPAQ stock surged to $21.60 in July, but pulled back and has been trading around $15.
Yes, this would be a speculative investment in a forming EV company. But a case is there for investors willing to take this risk.
On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C.