It’s been more than four months since TPG Pace Beneficial (NYSE:TPGY) announced its merger with EVBox Group, a leading European charging solutions platform for electric vehicles (EVs). Since its Dec. 10, 2020 announcement, TPGY stock has ridden a roller coaster from $11 to $34 and back down to $15.
My InvestorPlace colleague, Mark Hake, believes it is worth $44.61, more than 200% higher than today. Maybe it WAS worth that much in 2020 when investors were willing to pay almost anything for a piece of the special purpose acquisition company (SPAC) gold rush.
Today, however, the bloom is definitely off the rose. According to our own Vince Martin, $81 billion worth of SPACs are trading below their redemption price.
That’s a lot of SPACs facing a serious uphill climb. Investors have jumped off the bandwagon. It’s hard to know if they’ll ever jump back on.
Suffice to say, TPGY is not worth almost $45. If it is, I’ll eat my hat. Here’s why I feel this way.
TPGY Stock Valuation
Right now, if you own TPGY stock, you’ve got a problem. The stock did everything you would expect post-merger by jumping 116% on the first day of trading after the announcement. It then proceeded to climb to an all-time high of $34.28 on Feb. 9.
Then the CNBC SPAC 50 Index, which tracks 50 of the largest U.S.-based pre-merger SPACs, started heading south on poor investor sentiment. By late March, the index was no longer in positive territory for the year. Not surprisingly, TPGY followed suit, losing more than 50% of its value from its high.
Ok, so let’s get back to the stock’s valuation. My colleague attached a pro forma market value of $2.8 billion and an enterprise value of $2.2 billion [$2.8 billion less $593 million in cash on EVBox’s balance sheet post-merger]. The market value is based on an $18.10 share price and 155.0 million shares outstanding.
To get to $44.61, he takes 30.8x its 2021 estimated sales, which gives us a market value per share of $32.63. He then takes 18.2x its 2022 estimated sales for a market value per share of $56.59. Average the two and you get $44.61.
Why 30.8x and 18.2x sales for 2021 and 2022? That’s more in line with the valuation ChargePoint Holdings (NYSE:CHPT) receives from investors. He goes on to suggest that even if ChargePoint’s 2021 multiple of 38.5x sales were cut in half, CHPT would still be 26% more expensive than TPGY/EVBox.
Once EVBox merges with TPGY and starts trading as EVB, he believes its valuation will move in line with ChargePoint.
Here’s the Rub
Between 2015 and 2019, EVBox grew its sales from $12 million to $70 million, a compound annual growth rate of 55.2%. It then projects compound annual growth of 57% over the next three years to $270 million in 2022.
Meanwhile, for the fiscal year ending Jan. 31, 2022, ChargePoint expects year-over-year growth of 37% to $200 million at its midpoint guidance. In fiscal 2021, the company’s revenue grew by just 1.4% to $146.5 million. ChargePoint attributed this slowdown to Covid-19.
However, between 2021 and 2026, it anticipates compound annual growth of 60%, considerably higher than what it did in fiscal 2021 or what it expects to do in fiscal 2022.
Needless to say, both EVBox and ChargePoint are facing increased competition, combined with a bit of an unknown as to the ultimate uptake for EV purchases over the next few years. That makes handicapping both of them that much more difficult.
Earlier in April, I suggested that if you bought CHPT in the mid-$20s and held for 12-24 months, you ought to make out okay. It will open today around $22.
Having read my colleague’s analysis, I’m less enthusiastic about ChargePoint’s stock in the $20s, and I’m certainly not very enthusiastic about EVBox having a valuation of $45.
Until the EV business resumes its upward climb — translation: Tesla (NASDAQ:TSLA) trades above $800 — I’m reluctant to get very excited about either TPGY or CHPT at this point.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.