Blank-check companies are all the rage this year, with dozens of deals closing to bring companies public rather going the IPO route. One new deal worth watching involves Switchback Energy Acquisition (NYSE:SBE) stock.
Switchback announced on September 24 that it is merging with ChargePoint in an enterprise value deal that is valued at $2.4 billion. ChargePoint is one of the top electric vehicle charging networks Europe and North America.
This deal offers investors a distinct play on the electric vehicle trend without trying to guess which companies will emerge as the most profitable manufacturers of EVs.
That alone makes it an enticing play that should be worthy of your attention.
A Closer Look at the Deal
ChargePoint was founded 13 years ago. It sells the networked charging hardware, software and support services that organizations and businesses need to turn parking lots into EV charging stations.
Currently, the company has a customer base of more than 4,000, collectively operating a network of more than 115,000 public and private places to charge electric vehicles. The company says it also offers another 133,000 public places in North America and Europe through network roaming integrations.
The size of this network is impressive. Already, ChargePoint says a driver plugs into ChargePoint’s network every two seconds, and the company has logged more than 82 million charging sessions.
The combined company will be called ChargePoint Holding and trade on the New York Stock Exchange. The combined company is expected to have an enterprise value of $2.4 billion, plus $683 million in cash.
Both boards of directors have already unanimously approved the deal, which is expected to close before the end of the year.
A Growing EV Industry
The EV space represents one of the most enticing opportunities for growth stocks right now. Dozens of companies are vying for supremacy as consumers grow more concerned about being good stewards of the planet and try to avoid gasoline-powered cars.
Bloomberg reports that EV passenger sales rose from 450,000 in 2015 to 2.1 million in 2019. Growth is expected to accelerate after this year, reaching a projected 8.5 million in annual EV car sales by 2025.
By 2030, Bloomberg estimates that there will be 116 million electric vehicles on the roads around the world.
Such growth offers investors some interesting ways to play the space. Rather than trying to figure out which EV manufacturers will emerge as dominant, it makes sense bet on the infrastructure that will be needed to recharge all those vehicles on a regular basis.
That’s what makes the deal appealing for Switchback, the special purpose acquisition company merging with ChargePoint. Switchback CEO Scott McNeill says he expects investments in charging infrastructure to reach $190 billion around the world by 2030:
“As a first mover in the space, ChargePoint has distinguished itself as the number one EV charging network and is well positioned to deliver mission-critical charging infrastructure as the expected transition to electric mobility accelerates. ChargePoint has a proven and capital-light business model that combines hardware and high-margin, recurring software subscriptions and services with extensive and strong customer relationships. As a result, we believe ChargePoint will continue to grow its strong market position as the EV industry evolves. Switchback and our investors are excited to partner with the talented ChargePoint team to advance their vision.”
The Bottom Line on SBE Stock
ChargePoint hopes to increase the number of its charging points to 2.5 million by 2025, which will allow it to keep up with the growing interest in electric vehicles over the next few years.
SBE stock, which jumped dramatically in September as news of the merger became public, can still be had for around $15. While the combined company is not expected to turn a profit until 2025, it says that it won’t need any additional funding before it reaches EBIDTA profitability.
SBE stock has an “A” rating in my Portfolio Grader right now.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.