In early November, a special purpose acquisition company (SPAC) called Tuscan Holdings (NASDAQ:THCB) announced its plans to combine with electric-vehicle battery maker Microvast, thereby make it publicly available for trading. Since that time, holders of THCB stock have experienced more than their share of ups and downs.
Investors in SPAC stocks should expect some volatility. This is especially the case when it comes to stocks in the electric vehicle and related sectors.
Therefore, pouring your entire retirement account into THCB stock isn’t necessarily a great idea. Yet, if you believe in the future of automotive electrification, Microvast is a good company to place a moderately-sized bet on.
So, let’s begin with an analysis of the price action of THCB stock thus far. It’s been a bit of a roller coaster ride, but there could be room for further upside in THCB.
THCB Stock at a Glance
Prior to the Microvast merger announcement, THCB stock wasn’t exactly stealing the headlines. As you’ll find with many pre-deal-announcement SPAC stocks, THCB stayed close to the $10 level for a while.
The next thing you know, November came along and THCB stock took off. However, it didn’t go up in a straight line. A series of higher lows and higher highs took the stock to the $19 area by Dec. 28.
A sharp correction followed in January, with THCB stock falling below $15. Yet, there’s an old saying in the markets: “Be right and sit tight.”
That principle seems to apply to THCB stock, as patient investors were rewarded when the share price jumped to a 52-week high of $25.20 on Feb. 1.
As of Feb. 19, THCB stock was trading near the $19 level again. This means that investors may have an opportunity to grab some shares below the peak price.
A Pick-and-Shovel Pick
Many investors prefer to focus on companies that manufacture electric vehicles, and there’s nothing wrong with that. On the other hand, it’s possible to wager on the future growth of automotive electrification in a less direct way.
Microvast, and therefore THCB stock, is what you might call a pick-and-shovel type of investment. It’s an analogy carried over from the gold mining sector. Why invest in one gold miner when you can invest in the equipment and accessories that all gold miners will need?
That’s the basic premise behind an investment in THCB stock. Of course, the decision makers at Tuscan Holdings were fully aware of this when they targeted Microvast for a merger.
And, the shell company chose one of the best in the business. At the time of the merger-intent announcement, Tuscan Chairman and CEO Stephen Vogel reported that Microvast’s battery technology was already installed in more than 28,000 vehicles globally.
A Market on the Move
Moreover, Microvast’s founder, Chairman and CEO, Yang Wu, asserted that his company was expected to generate over $100 million of revenue during the financial year.
While the vehicle electrification market is still growing, don’t assume that Microvast is a latecomer.
In fact, Microvast was founded back in 2006, and the company has already established itself as a leader in providing batteries with long life, quick charge times, cost-efficiency and solid safety profiles.
Microvast sees a massive addressable market for battery technologies for commercial and specialty electric vehicles. The numbers are mind-blowing:
[A] global commercial vehicle market comprising over $1 trillion in annual sales, more than 10 million vehicles, and a commercial EV total addressable market of $30 billion… Commercial EV sales currently represent 1.5% of the market but penetration is expected to reach almost 9% in 2025, representing a CAGR of 55%, from 2020 to 2025.
The Takeaway
Microvast is making its mark as a leader in its vehicle electrification niche.
The business combination with Tuscan Holdings enables retail investors to take a long position in Microvast. THCB stock might be a fast mover, but that’s not a bad thing if you see a robust future for this unique pick-and-shovel play.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
