Switchback Energy Investors Have a Choice

The global bubble building around electric vehicle stocks shows no sign of easing as 2021 arrives, which means some protection might be in order. Some might consider a risky play in Switchback Energy Acquisition Company (NYSE:SBE) and shares of SBE stock.

a chargepoint charging station
Source: Michael Vi / Shutterstock.com

The new year’s arrival also means that Switchback Energy, a special purpose acquisition company (or SPAC), is slated to complete a reverse merger with ChargePoint. ChargePoint is a California-based company that is an international leader in charging stations for electric vehicles. The deal is currently expected to be completed in February.

SBE stock began drawing investor interest once the proposed merger with ChargePoint became known. The volatile stock is currently trading around $41. This price marks a hefty increase from its September 2020 start in the $10 range.

Let’s Look at SBE Stock

When I last wrote about Switchback Energy on Dec. 21, SBE stock was trading at $36. Investor enthusiasm for the SPAC had been solid even though the date for the $2.4 billion reverse merger with ChargePoint seemed elusive. Prospective closing dates have come and gone.

Now, however, investors have a little bit more clarity on that point.

SBE shareholders will decide the fate of the proposed merger when they vote on Feb. 11. It seems reasonable to assume the deal will close shortly thereafter if the merger is approved. (And it is expected to be approved.)

Looking back, SBE stock peaked at around $50, but slipped as officials kept postponing the merger vote.

Those who bought SBE stock at lower prices are admittedly facing a dilemma. Is the prudent move to sell those shares and capture profit? Or, is this one to hold until the stock settles following the merger.

Frankly, taking profit is the only sure move at this point. Holding on is a gamble. And holding on is best reserved for investors who can stomach the volatility that will surely follow the reverse merger. SPACs are notoriously volatile but there are instances where investors who stayed the course were rewarded.

As a SPAC, Switchback Energy’s days are indeed numbered. The company will cease to exist once the reverse merger with ChargePoint is completed. So, too, will the SBE ticker. It will be replaced by CHPT.

EVs Don’t Need Gas Stations, But …

Electric vehicles offer many advantages. The engines are less complicated than their internal-combustion cousins. No polluting emissions, either. Performance is impressive. (This shouldn’t be a shock since trains have long used electric motors for propulsion. The diesel roar you hear comes from the generators.)

But it’s not all a bed of rose petals. Batteries that store power for EVs have distinct limitations. This means long trips are difficult to manage because we don’t have as many charging stations as we do gasoline stations.

Obviously, that’s where ChargePoint comes in. The company operates about 115,000 charging stations that were installed in 14 different countries. ChargePoint’s focus has been on North America and Europe. ChargePoint is a comprehensive player in the industry, as it manufactures and installs the charging systems it operates. Sites of the chargers vary and range from apartment complexes to shopping centers.

ChargePoint is not the only company in the charging business. But it is a leader, and the proposed merger with Switchback Energy has put it in the spotlight.

The Bottom Line

Finally, interested investors have a date for shareholders to vote on the proposed reverse merger of Switchback Energy and ChargePoint. If the deal is approved on Feb. 11, observers expect CHPT stock to soon be trading.

Although ChargePoint will be new to the stock market, the company itself is not brand new. It was founded in 2007.

ChargePoint will be an indirect play on electric vehicle stocks, which primarily are manufacturers. It will be interesting to see if CHPT stock is consumed by the bubble that has pushed many EV to unrealistic heights. But unlike many speculative EV stocks, ChargePoint has a track record and proven products in use.

In the meantime, investors have decision to make regarding SBE stock. If you acquired the stock when it was cheaper, taking profits now is certainly sensible. Investors thinking about starting a position in SBE stock should consider wait. It is overpriced and waiting until CHPT dips makes sense.

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. and began writing for InvestorPlace in 2020.


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