The Post-Merger Future Looks Bright for Star Peak Energy Transition Stock

Star Peak Energy Transition (NYSE:STPK), a special purpose acquisition company (SPAC), has lately been the center of investor attention. STPK stock made its initial debut in August 2020 at an opening price of $10. It started 2021 around $21, and is now hovering at $43. The reason behind the rapid rally was the Dec. 4 announcement that STPK would be merging with Stem, a privately-held clean energy storage group.

Battery storage at a Solar Farm with switchgear or switch gear in the background

Source: Dorothy Chiron /

Stem, which was founded in 2009, claims its total addressable market should grow 25-fold in the next decade as renewable energy explodes and storage capacity improves and becomes more efficient.

Without storage, energy has to be used when it is produced. Put another way, the battery technology specialist Stem operates in a crucial sub-section of the alternative energy area.

Given the importance Wall Street puts on clean energy businesses, today’s article looks at what to expect from STPK stock in the coming months. I believe the company deserves to be on your radar screen and potential investors might consider buying the dips in the shares. Here’s why.

SPACs Are Getting Hotter

Market participants keeping tabs on SPAC merger news have had a lot to absorb in recent quarters. As most readers know, SPACs offer an alternative to the traditional initial public offering (IPO) to access the public markets.

Investors’ appetite in SPACs is considerable. The total number of SPAC IPOs in the U.S. in the ten consecutive years from 2009 to 2018 was 167. In 2019, the number increased to 59. In 2020 there were 248 SPAC IPOs in the U.S. According to SPACInsider in 2021 there have already been over 150 SPAC IPOs in the U.S., raising close to $50 billion.

Sizzling SPAC reverse-mergers of recent months include AdaptHealth (NASDAQ:AHCO), Draftkings (NASDAQ:DKNG), QuantumScape (NYSE:QS), Immunovant (NASDAQ:IMVT), MP Materials (NYSE:MP), Open Lending (NASDAQ:LPRO) Repay Holdings (NASDAQ:RPAY), and Switchback Energy Acquisition (NYSE:SBE). Now STPK stock gets ready to join the ranks of these recent mergers.

Another point to remember is 2020 became the year of clean energy stocks as they become disruptors in the energy sector.

“The clean energy transition requires a co-evolution of innovation, investment, and deployment strategies for emerging energy storage technologies,” according to recent research led by Noah Kittner of the Energy and Resources Group, UC Berkeley.

In the case of a SPAC reverse-merger like STPK stock that focuses on a business in the alternative energy space, Wall Street becomes interested.

What to Expect From STPK Stock

California-based Stem’s customer offerings include integrated battery storage systems as well as network integration and battery optimization. Its unique niche is its artificial intelligence (AI)-driven software platform, Athena. The technology behind the platform can help decrease not only carbon emissions but also energy costs.

The announced merger between STPK stock and Stem is expected to close in the coming weeks. The combined company will be listed on the Big Board under the new ticker symbol “STEM.” Its equity value is estimated to be around $1.35 billion.

“The Star Peak team has significant experience investing in the broader energy infrastructure, renewables and technology sectors” said Star Peak CEO Eric Scheyer of the merger. “We believe Stem represents a highly compelling opportunity to capitalize on the scarcity of high-quality, public clean energy companies with attractive ESG characteristics, significant scale and visible growth.”

As a result of this high technology, Stem is already well-known. Its potential customers include stakeholders in the energy grid, including utilities and corporations.

Electricity storage enables utilities to better plan their needs as they buy energy on the electricity markets from power generators. From 2021 to 2026, Stem’s revenues are projected to grow at around 50% compound annual growth rate (CAGR).

Its current revenues are around $33 million. In 2026, its estimated revenues could be well over $1.1 billion. Stem already has partnerships in place with leading utilities and businesses.

They include Amazon (NASDAQ:AMZN), Dominion Energy (NYSE:D), DTE Energy (NYSE:DTE), Facebook (NASDAQ:FB), Public Service Enterprise Group (NYSE:PEG) and Walmart (NYSE:WMT). We can expect many more names to join the list.

The Bottom Line on STPK Stock

SPACs are trendy, especially in the clean energy space. With projected recurring revenues, STPK stock has a good chance of also creating shareholder value.

The growing interest in ESG (environmental, social and governance) themes worldwide, supported by the Biden administration’s green initiatives, could also provide tailwinds.

In the coming week, the reverse merger between STPK stock and Stem will finalize. Many on the Street like the investment case and I agree. Potential investors could buy the dips in the stock. However, shares will likely be volatile in the short-run.

Are you interested in SPACs but are not sure which company to invest? You might also consider exchange-traded funds (ETFs). They include the Defiance Next Gen SPAC Derived ETF (NYSEARCA:SPAK), the SPAC and New Issue ETF (NYSEARCA:SPCX), and the Morgan Creek – Exos SPAC Originated ETF (NYSEARCA:SPXZ). 

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.

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