Spartan Energy Has a Long Road to Revenue, So Skip It

Spartan Energy Acquisition (NYSE:SPAQ) stock came to prominence only a few weeks ago. Prior to the Fisker deal, it wasn’t much talked about outside of niche circles.

an electric vehicle (EV) at a charging station representing SOLO stock
Source: Alexandru Nika / Shutterstock.com

Shares jumped to nearly $17 on that news, traded down to near $12 a month later, and have risen back to above $15. The neat U-shaped decline and increase in that time may lead speculators to believe it will break out. 

I’m not so sure about that. Catalysts for SPAQ shares to rise quickly are mixed at best. Despite EV acceptance and market interest in all things EV and clean tech, this stock has a volatile ride ahead. 

Arrival and Production

There is currently a lot of interest concerning SPAQ stock due to the Fisker announcement and EV interest in general. But for investors into the stock, it would pay to consider future sales, particularly what kind of timeline investors might expect regarding delivery and future demand. Ultimately, the stock price will highly correlate to sales. 

I’d like to make a point of distinction here regarding some of the wording on Fisker’s website. The wording has the potential to cause misunderstanding. Fisker’s “about” page states that the Fisker Ocean is arriving in 2022. Readers digesting that alone could well believe that this vehicle will be on sale by 2022. That’s logical and seems plausible. After all, the company has been extant since 2005.

However, a news release provides further elucidation in stating that the company expects to bring the Fisker Ocean to market by 2025. Production is slated to begin in late 2022. The point here is that sales and revenue are four years away. 

Reservations and Demand

In late July, Fisker reported more than 7,000 reservations for its Ocean SUV. We can assume that the number has risen somewhat since then. I cannot manage to find a breakdown of lease versus purchase intent regarding those 7,000-plus reservations. The point here is not to get into the weeds of leasing and purchasing options, but rather to gauge some idea of demand. 

For the sake of comparison, Tesla (NASDAQ:TSLA) reported 250,000 reservations for its Cybertruck following its reveal. Tesla is much further along than Fisker so this is admittedly not an apples-to-apples comparison. But it does provide some basis for analysis. 

In any case, these are longer-term considerations. Current investors in SPAQ stock are more likely to be interested in short-term catalysts. 

Catalysts

The obvious overarching macroeconomic catalyst is simply EV demand and acceptance. Right now, there aren’t lots of choices.

Tesla has the best-selling EV globally. In the first half of 2020 the Model 3 sold 142,000 units. The runner-up globally was the Renault (EPA:RNO) Zoe BEV with 38,000 units sold.

Outside of Tesla, there aren’t any dominant forces in this space. There are emerging manufacturers including Nio (NYSE:NIO), but also plenty of room for entrants. Fisker is looking to do so, and SPAQ shares will be the investment by which to capitalize thereon. 

SPAC Shares Pop

SPAC is an acronym meaning special purpose acquisition company. A few, including DraftKings (NASDAQ:DKNG) and Nikola (NASDAQ:NKLA) made investors money recently which has piqued interest in the investment type. Nikola has, of course, lost significant market capitalization but that isn’t an indictment of the investment vehicle itself. SPACs raise capital through an IPO in order to buy a company which already exists. 

According to Investopedia, SPACs were utilized to raise a record amount of IPO capital in 2019. Further, 50 SPACs have been formed in 2020 raising over $21.5 billion in capital. 

Markets must imagine that this was part of the reason Fisker was spun into SPAQ stock. Capital has been flowing into this type of investment. Fisker and SPAQ are trending because they are in trending areas: EVs and SPACs in an overheated stock market. 

Verdict on SPAQ Stock

I think this is simply a stock to keep in mind. The company capitalized on some trends and raised some money through this merger. That isn’t an indictment either. That’s a perfectly legal and common means of raising capital.

But I don’t think SPAQ stock is going to rise any time soon. Markets saw what happened to Nikola. Nikola has manufacturing contracts in place and has broken ground in Arizona. To my knowledge, Fisker doesn’t yet. So, in that regard, Nikola is further along but decreased in price anyway.

More to the point, my concern is that with production and delivery far away (2025, not 2022), investors are going to be sitting on their hands for a long time. That’s not a game I want to play. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. 


Article printed from InvestorPlace Media, https://investorplace.com/2020/09/spartan-energy-has-a-long-road-to-revenue-so-skip-it/.

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