With 2020 one for the pandemic-infested history books, it’s safe to call it the Year of the SPAC, or special purpose acquisition company. One such SPAC that burned rubber out of the gate was CIIG Merger Corp. (NASDAQ:CIIC). In its first week of trading in mid-November, CIIC stock jumped 152%. (By the way, that’s no typo: The company is CIIG, the ticker is CIIC. Oy, my aching spellchecker.)
The goal of any SPAC is to perform what’s called a “reverse merger” to fund a company that wants to go public. And while fast starts among SPACs are common, the holidays weren’t so kind to CIIC stock. Since hitting a peak on Dec. 4, it’s shed a quarter of its value. But there is an overarching bright side.
First, CIIC stock remains up more than 150% since it landed on the Nasdaq. And second, this company could ride the coattails of two other mission-accomplished SPACs in the sector all three share: electric vehicles.
CIIC Stock Gets on the Bus
Two of the newest high-profile EV companies, Fisker Inc. (NYSE:FSR) and Lordstown Motors Corp. (NASDAQ:RIDE), came about as a result of 2020 SPACs. Next up is a U.K.-based company called Arrival, which makes electric buses. If you’re buying CIIC stock, that’s ultimately where your money will wind up come March. But is this bus headed in the right direction?
In terms of the EV sector, there’s a strong argument for yes. For while a host of newer public companies, concluding Chinese entrants Xpeng (NYSE:XPEV) and Nio (NYSE:NIO), build cars and SUVs, Arrival stands alone as a bus manufacturer. Once it goes public, the newly formed Arrival Group (slated to trade under the ticker ARVL) will have plenty of elbow room in that far less competitive corner.
So unless driving an electric bus to the next family picnic is your thing, Arrival isn’t going after you as a customer but rather the mass transit and commercial markets. In that way, it’s akin to Workhorse (NASDAQ:WKHS), which makes commercial vans and is in the running for a $6 billion contract with the United States Postal Service.
Cute Buses, Clever Factories
It’s an odd but relevant fact of life that in the automotive industry, eye-catching vehicles make investors turn their heads. Looking at Arrival’s products, they’re cute and futuristic as all get out. The commercial vans look like rectangular marshmallows and trapezoids on wheels, the buses like resplendent, rolling tubes of glass.
What’s more, the building process holds serious promise to encourage anyone holding CIIC stock. Scaling up presents a huge challenge problem for EV makers, but Arrival has a creative plan to get there in a hurry. It plans to construct two “microfactories” that, if you like, reinvent the wheel for making wheels. You have to see these things. They are so compact that you could practically pack one up in a U-Haul.
Arrival says these highly automated, small-footprint facilities can be deployed in existing commercial spaces, costing as little as $50 million and ready to go in six months. They’ll be easy to adapt as vehicle design needs or market demands change, too. The first two — one in the U.K., the other in South Carolina — should come online this year.
A Clear-Cut Case for CIIG Merger
Another reason I like CIIC stock is that some mighty big names have lined up in advance of Arrival’s coming out party. Arrival lists Hyundai (OTCMKTS:HYMTF), UPS (NYSE:UPS) and funds managed by BlackRock (NYSE:BLK) among its strategic investment partners. To date, they’ve poured more than $300 million into the EV maker’s coffers.
It’s easy to see why. The need for eco-friendly public transportation and mass transit as a whole will explode in the next few years. By its own estimates, Arrival expects to make $14.1 billion in sales by the year 2024.
Granted, there are some caution flags. Running the numbers as only he can, InvestorPlace’s Mark R. Hake does note that CIIC stock is approaching full value, if it hasn’t arrived there already. But that’s hardly been an impediment for many EV investments, and as Hake notes, “it’s not as if this situation is static. Over time, as the company’s sales grow, the stock will no longer be at full value.”
Granted, investors tend to get prematurely ginned up on any company that has “EV” stamped somewhere on it. Still, CIIC stock looks like a smart play. Even if it attracts a bunch of bandwagon hoppers looking for a score, I’m not worried. There’s room on this bus for everyone.
On the date of publication, Lou Carlozo held a long position in NIO.
