After Tuscan Holdings Corp. (NASDAQ:THCB) completes its special purpose acquisition (SPAC) merger with Microvast, a newly traded company will exist and THCB stock will fade away.
Microvast is an EV battery manufacturer with American and Chinese connections. Like many others, I have trepidation around SPAC deals.
THCB stock certainly has headwinds in its favor. EVs look to be here to stay. Yet, fools rush in without doing their due diligence.
Investors can’t simply buy into every EV-related stock and hope to win. Microvast certainly has one glaring opportunity, so let’s start there.
Regular InvestorPlace readers will be quite familiar with the emerging EV landscape. There has been a lot of movement in the sector, especially in the last year.
It is no secret that investors are eager to get on board with the emerging electric vehicle nameplates. Microvast is intimately connected to this narrative now.
One of the bigger stories relates to the Next Generation Delivery Vehicle (NGDV) for the U.S. Postal Service. Microvast is now tied to this narrative as well.
Oshkosh Connection and THCB Stock
One of the most talked-about companies vying for the USPS contract was Workhorse (NASDAQ:WKHS). The USPS has been using the same fleet of 163,000 Grumman Long-Life Vehicles purchased between 1987 and 2001.
Workhorse looked to be the front-runner to win the contract. That would have given the USPS an electric-vehicle-dominated fleet.
Then, on Feb. 23, the USPS announced that it had chosen Oshkosh (NYSE:OSK) to develop the NGDV. Oshkosh’s vehicle was assumed to be an internal combustion vehicle.
According to the press release announcing Oshkosh’s win, the government wants both the electric and combustion options on the table:
“The vehicles will be equipped with either fuel-efficient internal combustion engines or battery-electric powertrains and can be retrofitted to keep pace with advances in electric vehicle technologies. The initial investment includes plant tooling and build-out for the U.S. manufacturing facility where final vehicle assembly will occur.”
Oshkosh invested in Microvast on Feb. 1. agreeing to a $25 million private investment in public equity (PIPE) in Microvast. The two have also established a joint development agreement for future battery collaboration and integration.
Thus, if the USPS NGDV is electrified, Microvast is in a strong position to supply the batteries. Oshkosh will provide up to 165,000 vehicles over the next decade.
Larger Opportunity Than THCB
Microvast sees its total addressable market within EVs at $30 billion. The company has existing operations and sales. Microvast generated over $100 million in sales in 2020.
Microvast’s investor presentation claimss that it expects revenue to grow to $2.5 billion by 2025. Further, its batteries are currently in 30,000 vehicles across the globe and have traveled a cumulative 3.8 billion miles. So, the company does have positive results behind it.
It also has strong booked business ahead of it. Microvast has $1.5 billion in signed contracts through 2027. Microvast anticipates that its pipeline value is much larger, and amounts to $4.1 billion through 2025.
Microvast expects $800 million in SPAC proceeds from the deal. The proceeds will be used to pay down debt and to build out manufacturing facilities in the U.S. (Clarksville, TN) and Europe (Berlin, Germany).
Most SPACs are indeed about promise. THCB stock is no different. However, the investor presentation is noticeably short on deeper financial information. There isn’t a wealth of information to scrutinize.
Microvast is in the process of scaling up, but it seems likely that the company is scaling up less than stellar financial underpinnings.
In my opinion, there is an over-reliance on future expectations baked into giving THCB stock any of your investment dollars. The company’s $5.9 billion total identified opportunity sounds appealing. Of course investors understand this is a rose-tinted glasses projection. Yet, it seems worth reiterating that potential investors proceed with caution.
Therefore, I would simply keep Microvast on your radar. The company certainly has a great opportunity in front of it.
The expectations it lists in the investor presentation look reasonably appealing. Aside from that, we have little else to judge it by.
At best I would say that it is a hold. There is simply too much risk for me in it right now.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.