There has been a dearth of recently announced SPAC (special purpose acquisition company) mergers in the last several weeks. So today, let’s talk about four of the SPAC stocks, including one that recently closed.
If you’re interested in reading more about the world of SPAC mergers, you can also read my earlier articles on SPAC mergers, such as on Oct. 19, Oct. 13, Sept. 29, and Sept. 11, and Sept. 3. Most of these announced mergers will close in Q4 or early Q1.
Moreover, the article on Sept. 11 discusses how in-the-money warrants of SPAC merger deals work. These can often be even better investments. There is also a rumored deal included at the end of this article.
The more I review SPAC stock presentations, the more I am impressed with the forecasts and valuation disclosures from most of them. It’s frustrating that most IPOs don’t help investors analyze or value the proposed public offering.
Here is the list of the announced mergers of SPAC stocks and the target private companies I’d like to talk about today:
- InterPrivate Acquisition Corp (NYSE:IPV): Merger Target – Aeva
- Alberton Acquisition Corp (NASDAQ:ALAC): Merger Target – SolarMax Technology
- South Mountain Merger Corp (NASDAQ:SMMC): Merger Target – BTRS Holdings (aka BillTrust)
- Healthcare Merger Corp closed its merger on 11-2-20 with SOC Telmed (NASDAQ:TLMD)
Let’s dive in and look at these SPAC stocks.
SPAC Stocks With New Mergers: InterPrivate Acquisition Corp (IPC)
Merger Target: Aeva (Mountainview, CA)
Industry: 4D Lidar Sensors for Self-Driving Electric Vehicles
Pro Forma Market Capitalization: $2.1 billion
On Nov. 2, InterPrivate Acquisition Corp agreed to combine in a reverse merger with a private LiDAR company called Aeva. Aeva was founded by two former Apple (NASDAQ:AAPL) engineers to provide 4D LiDAR technology. It is used mainly for self-driving technology on electric vehicles.
The new symbol will be AEVA. After the PIPE (private investment in public equity) capital raise, it will have $328 million in cash. Today its pro forma market capitalization is $2.15 billion.
Porsche Automobile (OTCMKTS:POAHY) and Volkswagen (OTCMKTS:VWAGY) have a big stake in Aeva and are partners in the company as well. The company’s claim to fame is its 4D LiDAR on-a-chip technology which compacted the size of the technology to be used in trucks, cars, and self-driving electric vans.
The company’s well-done slide presentation forecasts $3 billion in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) by 2030. However, in 2025 it will make $880 million in revenue and $347 million in EBITDA. That works out to about $503 million in present value.
Therefore, its $1.8 billion enterprise value-to-revenue ratio is only 3.6 times. On page 33 of the slide presentation, AEVA says its peers have higher EV-to-revenue ratios. They range between 3.1 times to 12 times on a median basis.
Therefore, I estimate that at today’s price IPC stock (AEVA) is at least 100% undervalued. That is, it will be worth double today’s price in several years as its revenue forecast begin to be realized. This stock is worth a close look by serious investors in SPAC stocks.
Alberton Acquisition Corp (ALAC)
Merger Target: SolarMax Technology (Riverside, CA)
Industry: Solar Sensors
Pro Forma Market Cap: $2.2 billion
On Oct. 28, 2020, Alberton Acquisition Corp, a New York SPAC, announced a combination agreement with a California-based solar company called SolarMax Technology. The company claims to be California’s largest residential solar installation company, according to its website. It also puts together solar farms in China and has a number of commercial solar EPC (engineering, procurement and construction) services.
But there is a problem. Other than the original announcement, which is very sparse on details, there is no further information from either firm in the transaction. There is no forecast, no announcement of PIPE money accompanying the deal, no slide presentation, no forecast of earnings and valuation and no information on SolarMax’s website acknowledging the deal.
I don’t frankly see how the SPAC company can expect to get its shareholders to approve the deal without more forthcoming information. By the way, if it is out there, is surely is not easy to find.
So I highly recommend you pass on this deal.
South Mountain Merger Corp (SMMC)
Merger Target: BTRS Holdings (BillTrust) (Lawrenceville, NJ)
Industry: Cloud-Based Payment Processing Software
Pro Forma Market Cap: $1.85 Billion
On Oct. 19, South Mountain Merger Corp, a New York based SPAC, agreed to merge with BillTrust, a B2B cloud-based payment processing company. BillTrust specializes in digital accounts receivable and invoicing systems.
The deal is worth $1.5 billion at the original SPAC IPO price of $10. As of Nov. 6, SMMC stock was trading at $12.40, or 24% higher. Therefore, the pro forma market cap for the transaction is now $1.85 billion, based on the slide presentation data on shares outstanding.
BillTrust considers its software payments platform the “Venmo for B2B” transactions, where B2B means business-to-business. Its focus is accounts receivable (AR) automation. It will change its name to BTRS Holdings and will change its symbol on Nasdaq once the merger closes.
The company forecasts $105 million in revenue this year and $148 million by 2022. That puts its valuation now at 12.5 time revenue for 2022. So far the company has not disclosed whether it is profitable on a net income basis, but I assume it is not.
Moreover, on page 35 of its slide presentation, BillTrust shows that its competition and peers trade at ratios of 18 to 45 times revenue. Based on that, it appears that the stock is now at least worth at least 100% more, or roughly $24 per share. This looks like an interesting play for the long-term.
Healthcare Merger Corp (HCCO) / SOC Telemed (TLMD)
Merger Target: SOC Telemed – Closed on Oct. 30 (Reston, VA)
Industry: Telemedicine Technology
Pro Forma Market Cap: $691 million
This last deal closed recently, although it is not a well-known merger. On July 29 Healthcare Merger Corp agreed to merge with SOC Telemed. The deal closed on Oct. 30, and the combined company, now named SOC Telemed, trades under the new symbol TLMD.
SOC Telemed is a telemedicine technology company whose clients are hospitals and medical clinics. The company forecasts its revenue will grow to $113.5 million by 2022 from $57.3 million this year, from its presentation. Moreover, that is down from $66.2 million in 2019.
Therefore, this puts TLMD stock on a price-to-revenue multiple of just 6 times using its forecast 2022 revenue. Moreover, even using its forecast revenue of $80.4 million for 2021 it is at a multiple of just 8.6 times.
However, on page 22 of the slide presentation, the company shows that the average of its peers and competition trade at 12 to 33 times revenue. Therefore, TLMD stock is probably worth about double today’s price.
Rumored Deal: Galileo Acquisition Corp (GLEO)
Target Company: Elite Model World (Paris, France)
Bloomberg recently published an exclusive article about Elite Model World. It is considering going public through a merger deal with Galileo Acquisition Corp (NYSE:GLEO). Moreover, according the article, this would be a unique deal since Elite bills itself as the “the largest model management network in the world.”
However, there is no deal yet. This is partly because the SPAC needs PIPE money to fund the transaction. If it does, look to see whether GLEO might be an interesting play in your portfolio.
On the date of publication, Mark R. Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.