Interested investors have undoubtedly heard of SPAC offerings. This investment vehicle has hit Wall Street and garnered big-time attention among investors. As a result, Spartan Energy Acquisition (NYSE:SPAQ) has also caught investors’ attention.
Shares of Spartan Energy Acquisition erupted higher in June. Of course, that was around when shares of Tesla (NASDAQ:TSLA), Nio (NYSE:NIO), Workhorse (NASDAQ:WKHS) and Nikola (NASDAQ:NKLA) were ripping higher, too.
I mean, Tesla garnered a market capitalization of $475 billion at one point in the run.
Of course, there’s the consideration of how others have succeeded in going public via a special purpose acquisition company (SPAC). In the same electric vehicle (EV) space is Nikola and Workhorse, which both came public via a SPAC offering.
While Nikola has had plenty of drama lately, its success in making it to the public markets is noteworthy. Then there are other successful plays like Virgin Galactic (NYSE:SPCE) and DraftKings (NASDAQ:DKNG), which both went public via SPAC offerings.
So what exactly is Spartan Energy Acquisition?
As Tezcan Gecgil wrote in August, “Spartan had initially agreed with Fisker, a relatively recent addition to the world of electric vehicle (EV) makers, on a reverse merger. The initial date was set for Aug. 14. However, that date has now been delayed to Feb. 14, 2021.”
In short, what is Spartan Energy Acquisition? It is essentially Fisker.
Breaking Down SPAQ Stock
The EV space has been red-hot in 2020 with investors pouring resources into these names. Personally, I don’t get it. Short of Nio and Tesla, many of these businesses don’t even have revenues.
It was absurd to me that Nikola had achieved a higher market cap than Ford (NYSE:F) at one point, without any sales. Heck, the company hasn’t even completed its production facility yet. How can it be worth more than a well-established automaker?
As a result, there is both opportunity and risk with Spartan Energy Acquisition.
On the one hand, there is the possibility that investors stick with the EV enthusiasm. Again, I don’t get it, but my opinion doesn’t matter. I love Tesla’s cars, but I do not think the company is worth $400 billion at this point. But that doesn’t mean investors won’t bid it up to a $500 billion valuation and take its peers higher, too.
On the flip side, Spartan Energy Acquisition faces multiple risks. First, there has been a flood of SPAC offerings. It’s very possible the market gets “SPAC-ed out” and these names struggle in the future.
It’s also possible that investors start paying attention to the fundamentals. Nikola and Workhorse have generous valuations despite lacking fundamentals. If that’s the case, newcomers to the space may struggle. At least Tesla is the global EV leader and at least Nio has momentum on its side.
Finally, there’s the whole Nikola debacle. After being called a fraud, the company is under the microscope. The SEC is investigating it, the stock is getting hit, and despite the recent good news on a partnership with General Motors (NYSE:GM), GM is seemingly second-guessing the company it saddled up with.
Will this cause traditional automakers to be leery of Spartan Energy Acquisition? It’s certainly possible.
Sizing Up the Technicals
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Early in this article, I referenced the “explosion” higher in the share price. Shares of Spartan Energy Acquisition almost doubled in just a couple of days in June. However, that rally soon fizzled out.
In mid-September, shares again caught a whiff of momentum. However, Spartan Energy Acquisition wasn’t able to take out its June highs, securing a lower high in the process. Near the end of the month, the stock repeated the pattern, allowing a downtrend resistance line to form (purple line).
At the same time, the 50-day moving average and uptrend support (blue line) continue to hold. The stock is sending mixed signals, but we can use levels to help guide us.
On the upside, a close above $15 puts shares back above the 20-day moving average and downtrend resistance. That opens the door to a rally back toward $17.50 and the September high up at $18.24.
On the downside, a close below the 50-day moving average and uptrend support puts the September low in play at $12.52. In fact, this was a double-bottom low, hit on Sept. 4 and Sept. 24. A close below this mark likely puts the 200-day moving average on the table.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
