Another SPAC deal has been completed by an electric-vehicle developer. Spartan Energy Acquisition recently merged to become Fisker Inc. (NYSE:FSR), and FSR stock has arrived.
If the name Spartan Energy Acquisition rings a bell, you may recognize its ticker – SPAQ – that used to lead the way into articles about this particular reverse merger. Spartan was a special purpose acquisition company. It was a shell company formed and taken public with the sole aim of attracting a private company interested in going public.
SPAC mergers became fashionable during 2020. For some reason, this was especially true for nascent electric-vehicle companies.
Now that the Spartan-Fisker transition is complete, investors may wonder if it’s time to buy the resulting stock. The quick answer would be a wholehearted maybe. My follow-up response would be to urge a healthy dose of caution.
More Info About Fisker
The Spartan-Fisker deal has been in the works for some time. Now that it is done, I’m sure there will be more curiosity about what car designer Henrik Fisker has in mind.
This company is his second go in the business. He founded Fisker Automotive in 2007, and the company produced a hybrid named Karma. The venture didn’t succeed and went bankrupt about six years later. Fisker’s relaunch is focused on producing an all-electric car (the Emotion). The company says it will have a 400-mile range. The company also intends to produce an electric-powered SUV named the Ocean.
The Ocean is an impressive vehicle with lofty ambitions. My last InvestorPlace article on the company in September discussed its goals:
Behind Fisker’s claim is the company’s dedication to using recycled bottles and other plastics to make its SUVs. No leather seats here, either. And there’s more than the reuse of plastics. Other recycled materials include pieces of tires.
If this focus holds, and the supply chain can be directed to be efficient and cost-effective, then the Ocean will have made its unique spot.
Another difference with Fisker is the company will focus on design and development and contract with another firm to manufacture the vehicles. The thinking was this would spare Fisker the expense and time to build its own manufacturing facilities. At one point, said talks were reportedly underway with Germany’s Volkswagen (OTCMKTS:VWAGY).
On Oct. 15, however, Fisker announced an agreement with Austrian contractor Magna Steyr. Magna is an established manufacturer that makes vehicles for several companies, including Jaguar, BMW and Toyota. Under the deal, Fisker will utilize Magna’s electric vehicle platform.
A Look at FSR Stock
October was a whirlwind month for Fisker to merge with Spartan and go public. Officials at the company approved the deal on Oct. 28. A mere two days later, shares of FSR stock started trading on the New York Stock Exchange.
The reception has been lukewarm.
FSR opened at less than $10 per share. On its third day of trading, shares reached $11.65. FSR stock clocked in at $10.86 after its first week on the market.
To be fair, FSR stock is faring better than SPAQ did in the days leading up to the merger. The initial 13% gain is not bad. That said, it is not catching fire like some other EV names have done, and it may be that Fisker’s previous experience (no Karma puns here) is a factor.
The Bottom Line
Last month’s successful conclusion of the Spartan-Fisker reverse merger and the emergence of FSR stock on the NYSE are true milestones for Fisker Inc. In retrospect, though, I think that might end up being viewed as the easy part.
Several companies are jumping into the electric-vehicle arena, drawn by the success of pioneer Elon Musk and Tesla (NASDAQ:TSLA). It is very likely not all of these EV companies will survive as failure and that consolidation surely will take place as the industry settles and matures. (Remember, legacy automakers are also poised to enter the arena as well.)
Investors face two decisions. The first: decide if they want to buy shares of FSR stock. If the answer is yes, then they must choose when to make the move. I am concerned that there is too much volatility associated with the stock at this time. Only a very risk-tolerant investor, armed with money set aside for speculation, should buy shares this close to the public offering.
On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C.