Switchback Energy (NYSE:SBE) is a special purpose acquisition company (SPAC), a “blank check” shell corporation designed to take companies public without going through the traditional IPO process. SBE stock has almost tripled since announcing its merger with ChargePoint, which has the largest electric-vehicle charging network in North America and Europe.
SPACs are quickly becoming the go-to method for taking advantage of the renewable energy market, which is all set to surge after President-elect Joe Biden’s victory in the U.S. election.
In a low-interest-rate environment and with high valuations on other stocks, SPACs become a sensible place to invest your capital. SPACs have raised more than $60 billion this year — more than in the previous 10 years combined — for companies that wanted to avoid the hassles that go along with a traditional IPO.
Plus, with the rise of Tesla (NASDAQ:TSLA), now the most valuable car company globally, EV manufacturers are enjoying unprecedented interest. At least nine clean-energy companies plan to go public between now and the end of the year via reverse mergers.
I can understand the skepticism surrounding some of these investments. There is little to no information out there regarding many of these stocks, and, in many cases, it will take years for revenues to materialize.
However, I believe the upcoming $2.4 billion ChargePoint merger will be a gamechanger. ChargePoint pledged to operate 2.5 million charging points by 2025 back in 2018. It forecasts revenue to grow to $2 billion by 2026 from $145 million in 2019.
The bottom line is that the company has the biggest charging network in the world. If you want to make a bet, you might as well do it on the industry leader.
SBE Stock: Welcome to the Future
It’s safe to say 2020 has upended several traditions and introduced new ones. We were already on our way to the transformation of the transport sector when Covid-19 struck. However, the pandemic has exacerbated the pivot toward new energy vehicles. Naturally, that creates the need for charging points all over the country.
An analysis by Bloomberg New Energy Finance revealed that by 2040, electric cars could make up 57% of all passenger car sales worldwide. That is a 2% increase over the 2040 projection reported last year.
One of the main contributing factors is Covid-19. People like the blue skies that they see out their windows. And for the first time in history, electric cars have a purchase price more or less in line with gasoline-powered and diesel-powered cars. Plus, they already cost less to operate. Since 2010, battery costs per kilowatt-hour have plunged 85% due to economies of scale and operational costs.
Unique Selling Point
Now, where does ChargePoint fit in? Currently, Tesla sales represent approximately 80% of EV purchases in the U.S., and the company has the second-largest network of chargers after ChargePoint. However, the key thing to note here is that while Tesla vehicles can use any charger, Tesla’s network of chargers are only compatible with Tesla vehicles.
That is the unique selling point for ChargePoint, giving it 73% control of the EV charging market. And with every passing day, we are seeing new EV manufacturers pop up. So, there is no substantial danger of Tesla wrestling away a large chunk of market share from the company. ChargePoint’s Open Network will work like conventional gas stations, servicing any vehicle type, regardless of make or model.
Plenty of Tools
Apart from the charge stations, there are other business lines that should get investors excited. ChargePoint offers commercial and residential charging solutions as well.
For example, Charge Point Home Flex is a home charger, charging up to 50 amps through a simple wall outlet. You can use the ChargePoint app to track progress. And as a bonus, the U.S. government is subsidizing the cost of Home Flex by 30%. Finally, the company also offers cloud-based solutions for commercial charging-station owners.
Building out a portfolio of different products and services is essential to creating a sustainable business model. And ChargePoint seems to be doing just that.
Final Word on SBE Stock
SBE stock is up more than 300% year to date. As we move closer to the merger date, expect shares to continue rising for the foreseeable future. There will be several catalysts from now until the merger is finalized. Boards will vote on the combination. Regulatory bodies will approve it, and ChargePoint Holdings will list on the New York Stock Exchange shortly after the merger closes. We will also get the inevitable glowing reports from analysts.
That should interest you if you want to jump in and make profits trading. But more importantly, if you are in it for the long haul, then there are plenty of positive tailwinds that SBE stock can take advantage of.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. Faizan does not directly own the securities mentioned above.
