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Does a Billion in SPAC Cash Make Fisker Motors Stock Any Less Speculative?

Fisker Motors (NYSE:FSR) has completed its merger with Spartan Energy Acquisition, a special purpose acquisition company (SPAC), and begun trading on the New York Stock Exchange.

The Fisker logo hangs on display at the November 2011 International Auto Show.
Source: Eric Broder Van Dyke / Shutterstock.com

It’s just one of the slew of SPACs that have helped the NYSE gain on the NASDAQ, as the Financial Times noted earlier this week. These blank check companies have raised $66 billion this year on the Big Board compared to $61 billion on the rival.

The plan is to use roughly $1 billion of cash generated by the transaction to begin production of the Ocean, an electric SUV, at a contract manufacturing plant in Germany. The car would hit the market near the end of 2022.

Before the deal was finalized, a lot of digital ink was spilled, even here at InvestorPlace, about the SPAC. Thomas Niel wanted you to wait until the stock hit single digits.  (It closed Nov. 2 down 2.1% at $8.96.) It’s on “a road to nowhere,” wrote our Lou Carlozo. It’s “only for those who can handle the heat,” opined Josh Enomoto.

While it’s there’s speculation in the SPAC, is it really all bad?

The EV Gold Rush

Fisker is one of several start-ups aiming to compete with Tesla (NASDAQ:TSLA) in electric vehicles (EVs). Most have some connection to General Motors (NYSE:GM).

GM has an investment in Nikola (NASDAQ:NKLA) and its electric truck. Workhorse Group (NASDAQ:WKHS) wants to use an old GM plant in Cincinnati to make EVs for the Post Office. Lordstown Motors (NASDAQ:RIDE) wants to build pick-ups in an old GM assembly plant.

Fisker wasn’t built that way. Founder Henrik Fisker has been trying to get his company off the ground since 2007. After his initial plan crashed and burned, Fisker went back to the drawing board with Apollo Global Management (NYSE:APO), unveiling a prototype in January.

After failing to come up with an agreement to use Volkswagen’s (OTCMKTS:VLKAY) electric vehicle design, he made the current deal with contract manufacturer Magna International (NYSE:MGA).

The VW connection remains important, however. Fisker has not yet closed off the connection. VW sees its modular electric drive matrix (MEB) platform, which includes the battery and drive train, as a global standard. Vehicles using the standard are already rolling off Chinese assembly lines. In addition to committing lines like Audi to the platform, VW also has a deal with Ford Motor (NYSE:F) to manufacture MEB products in the U.S. starting in 2023.

Betting the Jockey

Fisker, a Dane who got his start designing luxury cars, is who you’re betting on if you buy FSR stock. Fisker has the swagger of Elon Musk but comes at the problem from a different direction, namely design.

This means there’s a lot of flashy marketing, aimed at big investors, small investors and consumers of luxury goods. The SPAC transaction means Fisker has the cash to execute initial manufacturing. If he gets sell-through, he has the connections to scale.

But it’s all a high-wire act, as our Alex Sirois notes. Electric cars are a revolution, but it’s unclear whether Tesla, start-ups or existing players will win the market. Fisker is a start-up with connections to existing players, which seems like the best of both worlds.

The Bottom Line on FSR Stock

History says Fisker is as likely to wind up as Preston Tucker as he is Walter Chrysler or Elon Musk. Musk’s success has thrown the whole industry into the air and there’s enormous uncertainty where it will come down.

Making an electric car, however, is just half of the current revolution. Making cars autonomous is the other half. Most of the start-ups, including Fisker, are emphasizing drivers and style first.

Contributor Tim Yeung considers Fisker a good speculation, thanks to Fisker and his team of VW veterans. My own view is that making a car electric is the easy part. The computer technology end — providing safety, reducing the need for drivers and interacting with other vehicles to create a transport system — isn’t here yet.

I’m going to wait for it.

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

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn.

Article printed from InvestorPlace Media, https://investorplace.com/2020/11/does-a-billion-in-spaq-cash-make-fsr-stock-any-less-speculative/.

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