Are you ready to drive off info the sunset with profits in the back of the truck? Blank-check company Pivotal Investment Corporation (NYSE:PIC) is betting that you are. The XL Fleet SPAC merger could be the next big thing in the electric vehicle space.
What is it exactly that investors should be watching? Well, Pivotal Investment Corporation is yet another special purpose acquisition company, or SPAC. These companies essentially write blank checks to take a hot business to the public markets and help it avoid an IPO. Pivotal has Wall Street excited because it has agreed to a reverse merger with XL Fleet, a startup behind commercial truck electrification.
Pivotal announced the deal on Friday, sending its stock soaring. Monday is seeing a continuation of that rally with shares up almost 7% in intraday trading. According to a company press release, the resulting reverse merger would value XL Fleet at $1 billion. The combined company would have $350 million in net cash, including $150 million from new strategic investors. When the deal closes, XL Fleet will continue to trade on the New York Stock Exchange under the ticker XL.
Do you see a match made in stock-market heaven? This has been both the summer of SPACs and the summer of electric vehicle companies. The XL Fleet SPAC merger is looking to ride that wave, as the company provides hybrid and plug-in hybrid electrification systems for commercial trucks.
All About the XL Fleet SPAC Merger
There is a lot to like about XL Fleet ahead of the deal. The company already has deals with several high-profile companies including FedEx (NYSE:FDX), PepsiCo (NASDAQ:PEP) and Verizon (NYSE:VZ). Investors should note that the broader wave of electric consumer vehicles has also sparked an interest in electrifying commercial fleets. Unlike rival Lordstown Motors (NASDAQ:DPHC), XL Fleet does not make its own vehicles. Instead, it outfits existing commercial-grade trucks from the likes of Ford (NYSE:F) and General Motors (NYSE:GM).
Plus, as part of its goal to reduce carbon emissions, XL Fleet provides customers with analytics on how their electrified fleets are helping the environment.
Another interesting tidbit from the company press release is that XL Fleet has as 12-month sales pipeline worth $220 million. It is also targeting revenue of $21 million in 2020 and $75 million in 2021.
Perhaps the most important catalyst for investors comes down to the novel coronavirus. The pandemic has sparked a broad interest in sustainability, making electric cars hotter. Investors have also seen the market continue to reward innovative companies, relying on the futuristic tech to drive the major indices higher. As the XL Fleet SPAC merger looms, it is important to know that the company is eyeing a $1 trillion total addressable market. That is a lot of trucks!
Although any new offering is far from a guarantee, coronavirus catalysts are working in XL Fleet’s favor. This SPAC merger could really be hot.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.