No matter how you feel about special purpose acquisition companies – including Switchback Energy Acquisition (NYSE:SBE) – there’s no ignoring how they’ve given plenty of jolt to the electric vehicle sector. An investment in SBE stock follows in the footsteps, for example, of DiamondPeak Holdings Corp., which became Lordstown Motors Corp. (NASDAQ:RIDE) last year.
As the EV sector goes, SPACs have served as effective capital drivers for new public companies. In the case of SBE stock, it will eventually fund ChargePoint, an electric vehicle charging station enterprise operating in 14 nations. Once a SPAC finalizes, the new company often gets a major lift in share price. Investors, hence, adore them like EV drivers love a fully-charged battery.
But the connection between any SPAC’s viability and the post-merger company over the long run is far less clear. There simply isn’t enough solid pre- and post-SPAC data to analyze. That means continued investment in SBE stock amounts to what I’ve dubbed (and should trademark as) “SPACulation.” Should we still forge ahead with SBE stock? Let’s see if it’s as “SPACtacular” as it looks. (Ah, another trademark opportunity!)
SBE Stock and its Eventual Charge Point
No doubt, SBE stock has put in one solid performance thus far. It’s risen a satisfying 279%. Right now, that amounts to a $1.56 billion market capitalization (in other words, what the company is worth).
Yet since Thanksgiving, a continuous run-up turned into four up-and-down undulations, each time with SBE stock dipping 10% or more. What’s driving this, and whether the dips as a whole correlate, is tough to say. Yet coming as close as they do to the bell ringer for ChargePoint, they suggest investor jitters.
Suffice to say, ChargePoint CEO Pasquale Romano must be licking his chops and biting his nails in anticipation of the big reveal when the new company hits the New York Stock Exchange under the ticker CHPT. And why not? That could happen in just days, as holders of SBE stock will vote on the reverse merger on Feb. 11.
Should Investors Switch Back?
As for the investors who look forward to ChargePoint going public, take note: Not every sub-portion of the EV sector is guaranteed to enjoy a share price rocket ride. As EVs head toward alternate fuel technologies such as hydrogen and solid-state batteries, it’s impossible to predict how today’s charging stations will fit tomorrow’s power needs – or not.
In the case of ChargePoint, the concerning factor centers on its inability to generate profit. Depending on how you look at it, the capital raised by SBE stock will either position it to get over the hump, or pump money into a leaky boat that isn’t going much of anywhere.
My InvestorPlace colleague Dana Blankenhorn sums up the dilemma well. He says that while many consider SBE stock a “no-brainer” since ChargePoint holds a leading spot in its sub-sector, ChargePoint faces more competition than it wants to admit. Isn’t that so often the way with these things? Kensington Capital Acquisition Corp, which took EV battery tech company QuantumScape (NYSE:QS) public, filed a Form 425 with the SEC that looked more like an infomercial slide show than nuts-and-bolts paperwork.
Taking a Station Break
Here’s what Blankenhorn wrote: “Tesla (NASDAQ:TSLA) will be a competitor. So will Volkswagen (OTCMKTS:VWAGY), which has a network called Electrify America as well as stations in Europe.” Spot-on points, both.
There’s also the question whether EV drivers need this service to begin with. Just as a convenience store trip comes at a lofty price point, ChargePoint and its ilk cost more to use than simply plugging in your four-wheeler and juicing it up at home.
As no analysts follow SBE stock, allow me to serve as the cerebral cortex behind this call. A “no-brainer”? Exactly – as in hold off in putting your money down. ChargePoint’s current financial state and not-so-slam-dunk value prop for EV drivers concern me.
Best, then, to wait at the station.
On the date of publication, Lou Carlozo held a long position in TSLA.