SPAQ Stock Should Rise Soon, But Then Volatility Ensues

Spartan Energy Acquisition Corporation (NYSE:SPAQ) stock has more news with which to evaluate it with recent manufacturing partner news. SPAQ stock is relatively stagnant following the news. But it solidifies plans nevertheless. Investors now know who will be handling the manufacturing of the Fisker Ocean. Volkswagen fell out of the running a few months ago which left investors curious. And the Fisker Ocean is a step closer to delivery.

The shareholder meeting to approve the merger between Spartan energy Acquisition Corporation and Fisker remains slated for Oct. 28. Given what investors already know about SPAQ and Fisker, is this worth investing in? That’s one of many questions surrounding EVs, SPAC funded stocks, and SPAC funded EV stocks. There seems to be a clear pattern emerging. Whether to invest is really a question of style, risk tolerance, and duration of investment. 

First of all, SPAQ has more news with which to judge its merits.

Manufacturing News

Fisker recently chose Magna (NYSE:MGA) as the manufacturer of its Fisker Ocean SUV. Magna stated that initial manufacturing will take place in Europe and be done exclusively by Magna. The Fisker Ocean will leverage  Magna’s EV architecture platform. Magna stated in a PR release that it has participated in the manufacture of 3.7 million vehicles from 30 different models. However, how many of those were EVs was not mentioned. 

As part of the deal Magna was issued warrants to purchase 6% of Fisker’s stock post-merger. The deal also makes it clear that Volkswagen’s (OtherOTC:VWAGY) MEB platform will not be utilized for the Ocean. 

Outsourced Manufacturing SPAC Funding

Nikola’s (NASDAQ:NKLA) Badger truck will be manufactured by General Motors (NYSE:GM). Readers will likely also be aware that Nikola was funded by a SPAC like Fisker. There is a possibility that this format will be an increasingly utilized method of bringing EVs to actual production. The format goes create a prototype, raise money for the project via a shell company, then find a manufacturer to carry out the capital intensive manufacturing.

Regardless of how other EV entrants engage in manufacturing, they will continue to utilize the SPAC format for funding. Faraday Future announced that it intends to merge with a SPAC. Other EV companies including Hyliion (NYSE:HYLN) have already done so.

Roll of the Dice

Investors have a lot of choices of EV stocks in this format. Consumers will have a lot of choices in EVs from all of these companies when they deliver their respective vehicles. It’s becoming clearer that simply purchasing shares of SPAC funded EV manufacturers is fraught with chance. This is true because there’s so many of them that will come to market this way, and so little information with which to judge them. 

Hyliion Deal? Nikola?

SPAC mergers with EVs are far from unprecedented as markets have recently seen. So, when shareholders convene on Oct. 28 to vote on the Fisker/SPAQ merger which will ostensibly be approved, what should be expected? Indeed past is often prologue. Nikola rocketed upward. Hyliion is riding high following shareholder approval. Subsequently it  looks like there’s little reason SPAQ stock shouldn’t on Oct. 28 as well. That much looks clear. 

But what about prices in the run up to production? Remember, that’s what investors are buying into here is the actual EV vehicles that these SPACs fund. 

Glut of Deals 

There is no shortage of EV deals done via the SPAC route. Nikola, Hyliion, DiamondPeak (NASDAQ:DPHC), and Kensington Capital Acquisition Corp (NYSE:KCAC) among others. 

But what happens in the run up to production? And what happens once production begins? Of course, no one knows. I personally am a fan of EVs and want to see more of them on the roads. However, I can’t help but feel that this format is getting a bit overheated. From a realist’s point of view there’s a lot that could go wrong between EV funding and the delivery of vehicles. 

Yield Caution

Nikola has proven that. And yes, to be fair it has recovered some since the scandal broke, and I for one really like the look of the Badger (although pre-production vehicles always look much better than their post-production counterparts). But there’s renewed controversy now regarding Nikola’s plans for the Badger. Nikola’s CEO has said the project will be killed if the GM deal falls through. 

It doesn’t take a stock guru to predict what will happen to Nikola’s price when that happens. If you listen closely, you can almost hear the sound of more lawsuits being filed. But in all seriousness, investors stand to lose a lot of money in that case, and these are real people. 

My point here is that the Fisker Ocean is slated for late 2022 production and delivery. We know nothing about the interim. We know nothing about consumer reception of the future Fisker Ocean either. 

Wrapping Up

I’m not against the idea of buying SPAQ stock to speculate on price movement related to the Oct. 28 vote. Further, I’m not against EVs – in fact I really like them. But, I believe in long-term investment primarily. I can’t shake the feeling that a subset of investors in this recent wave of SPAC/EV frenzy expect a bunch more Tesla’s to emerge. Some of these recent SPAC EVs are going to fall flat. Some may not even result in vehicles ever seeing production. 

I do think SPAQ is going to go up soon. Go make some quick money if you’re that type of risk-taker. Buy Fisker/SPAQ now to gamble on a post-merger jump. Apart from this, wait to pick it up nearer late 2022 as real news regarding production of vehicles nears. 

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

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