Over the past five years, investors didn’t have a whole lot of choices if they wanted to take a position in a pure-play electric vehicle company. The obvious choice was Blink Charging (NASDAQ:BLNK), but now there’s a promising alternative with Switchback Energy Acquisition (NYSE:SBE). As a result, SBE stock has the trading community charged up.
I’m a fan of what I like to call pick-and-shovel plays. For example, you don’t have to wager on a specific gold mining company, which can be a risky proposition. Instead, you can take a position in companies that sell the equipment that all of the miners will require (the proverbial picks and shovels).
You can effectively take the same type of approach in the electric car industry. It can be risky to invest in any particular electric vehicle manufacturer. Instead, you can take a position in a company that provides something that all electric vehicles will need — chargers.
There are privately held companies in the charging niche, but until recently, Blink was the go-to publicly traded name. With the Switchback special purpose acquisition company (SPAC), however, there is another option. And excitingly, it might be much better than Blink.
A Closer Look at SBE Stock
This is the year of electric vehicle and SPAC mania. So, it is no surprise that the SBE SPAC was met with great fanfare and big price moves.
We’ll get into the nitty-gritty of the reverse merger, but for now it’s important to take note of the price action in SBE stock. Prior to the merger, SBE shares were stuck in a range between $9 and $10.50.
The blastoff happened in mid-September, with SBE stock rocketing up to the $14 area by Sept. 17. However, neophyte traders soon learned a lesson about price discovery in the markets.
It’s not unusual for a stock that is being repriced to wobble around violently. After all, it takes time for the market to determine an appropriate range for a stock after a major event has taken place.
That’s precisely what happened with SBE stock as it quickly declined to $12. Hopefully not too many amateur traders got shaken out, though, since SBE powered its way back to the $16 region by Sept. 28.
Charging Ahead with ChargePoint
As you can see, you’ll be riding a wild horse if you take a position in SBE stock. Therefore, due to its volatility, I advise only taking a small position in SBE until the price settles into a more defined range.
With that in mind, let’s drill down to the basics of this SPAC. The company that merged with Switchback is called ChargePoint. At some point, the combined company will be called ChargePoint Holding and it is expected to be listed on the New York Stock Exchange.
It’s evident that Scott McNeill, CEO of the Switchback SPAC, is a believer in ChargePoint’s potential. By the year 2030, McNeill expects investments in charging infrastructure to reach a whopping $190 billion.
You Don’t Have to Sink with Blink
Moreover, McNeill asserts that ChargePoint holds the dominant position in the electric vehicle charging market. Lending support to McNeill’s contention is the fact that ChargePoint operates over 115,000 charging ports around the world.
Plus, the company hopes to increase that number to 2.5 million charging ports by 2025. In contrast, Blink has claimed to have a network of 15,000 charging stations.
And, even that comparatively low number is in dispute. Analytic firm Culper Research has suggested there are only 2,200 public charging stations in its network that are operational.
Perhaps as a result of trading skepticism, BLNK stock crashed in August. If you don’t want to deal with those potential issues, it might be best to place your bets on ChargePoint and SBE stock instead.
The Bottom Line
For all I know, BLNK stock might make a stunning comeback. However, that seems like a long shot.
On the other hand, SBE stock looks like a safer bet while also providing some excitement. ChargePoint has a much bigger charging station network and, all in all, appears to be less risky than Blink.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
