Upon an initial glance, Thunder Bridge Acquisition II (NASDAQ:THBR) stock looks like a special purpose acquisition company (SPAC) that just might break through the SPAC hype train that has infiltrated the market.
Its reverse-merger target Indie Semiconductor – announced in December 2020 – features loads of innovative solutions for the automotive industry.
That’s the good news. The not-so-pleasant story is that THBR stock is down more than 20% year-to-date, trading around $10.
Just based on the company’s name, you can understand why shares of the shell company are taking a beating. As I’ll explain later, the semiconductor industry is having a supply-chain crisis of its own (because of course it is).
From the novel coronavirus pandemic to raging social unrest to political upheaval to the recent blockage of the Suez Canal that was finally freed, the trailing year has been a series of disasters.
If I didn’t know any better, I might assume that someone or something is trying to teach us a lesson. Despite the ominous nature of our circumstances, though, it did bring a potential discount in THBR stock.
Yes, the headwinds are not pleasant, that’s for sure. However, you can make the argument that these are external problems. Fundamentally, Indie Semiconductor is a play on the future of transportation.
That being the case, THBR stock offers a compelling case for patient investors. This just might be the classic story of a good company stuck in bad times not of its own doing.
Indie brings to the table a mix of currently relevant applications, such as automotive connectivity, user experience and electric vehicle services, along with forward-thinking innovations such as autonomous driving solutions.
As you know, the driverless industry is heating up rapidly, with multiple companies making encouraging progress. Therefore, when Indie claims that it’s building an “uncrashable” platform, it’s not as far-fetched of a proposal as it would have been 10 years ago.
THBR Stock Is Getting a Reality Check
Generally speaking, SPACs are initially priced at $10. From there, market forces can take shares of these blank-check firms substantially higher, especially if the SPAC sponsors are household names. Like other hotly anticipated reverse mergers, THBR stock received a very nice bump from its initial offering price.
Now back around $10, it appears that those who missed the boat the first time have a time capsule opportunity on their hands. If shares were worth $14 a pop before the semiconductor crisis, they logically should be worth that much after the crisis is over, all other things being equal. That might make THBR stock a steal for those that have the foresight to get in now.
But when will the semiconductor crisis end? First, let’s back up and discuss why we’re in this situation.
Basically, industries that use semiconductors – particularly the automotive industry – badly miscalculated the demand that would eventually return following the worst of the pandemic’s impact. I can’t blame them – it’s counterintuitive that people will buy cars and other electronic gadgets during an economic crisis.
But because this is a health crisis primarily, those who previously depended on public transportation suddenly bought personal vehicles en masse. Anticipating order erosions from other sectors, suppliers naturally whittled down their production rate.
Unfortunately, the demand rebound created a hoarding panic (sound familiar?). This dynamic has negatively affected several companies, including Ford (NYSE:F), Qualcomm (NASDAQ:QCOM) and Sony (NYSE:SNE).
Further, according to incoming Qualcomm CEO Cristiano Amon, the chip shortage may not end until late 2021.
True, President Biden waxed poetic about securing and stabilizing chip supply chains, but the biggest challenges is cost and time. It takes billions of dollars to build new fabricators, but with a timeframe of 12 to 18 months before completion the crisis could be over before the solution can work.
Lingering Questions Remain
But even if the supply chain crisis fades, that doesn’t mean the economic impact will simply disappear. The Suez Canal blockage provides an excellent analogy.
Sure, the world celebrates the canal’s reopening, but many ships that were waiting during the blockage decided to take the longer route around Africa. That is going to cause huge delays, with an impact that will reverberate for months to come.
In my opinion, the same problem will affect the semiconductor industry. Thus, I don’t see THBR stock escaping a headwind once chip supplies resume. Moreover, we can reasonably expect that semiconductor-dependent companies must go lean throughout this year, thereby losing business opportunities.
Still, THBR stock is priced much more attractively today. If you’re thinking about speculating, a small position now wouldn’t be a bad idea. However, don’t pull the trigger before we know how the semiconductor crisis will play out.
On the date of publication, Josh Enomoto held a long position in F and SNE.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.