Let’s not mince words here. There’s a certain amount of “deal risk” associated with a special purpose acquisition company (SPAC) stocks. It’s possible for reverse merger deals to fall through, and that’s a concern facing TPG Pace Beneficial Finance (NYSE:TPGY) and, therefore, holders of TPGY stock.
There was a time, earlier this year, when SPAC stocks seemed like the Holy Grail. They all seemed to be unstoppable – but in the financial markets, trends don’t last forever.
As SPAC mania faded, so did TPGY stock. And I must admit, as the share price declined, I recommended buying the stock at a discount.
Today, I’m going to reverse course and suggest putting the brakes on any investments in TPG Pace Beneficial Finance. As we’ll see, a particular filing with the U.S. Securities and Exchange Commission (SEC) should throw a wet blanket on anyone’s get-rich-quick dreams with this stock.
A Closer Look at TPGY Stock
It could be said that TPGY stock is the poster child of the SPAC craze as it popped and then dropped.
Prior to Dec. 10, 2020, the shares were trading near the $10 level. That’s typical for SPAC stocks when a reverse-merger target hasn’t been disclosed yet.
All of a sudden, TPGY stock exploded to the upside, reaching the $30 level on Dec. 23. And the buying frenzy continued into the new year, with the stock hitting a 52-week high of $34.28 on Feb. 8, 2021.
That trajectory apparently wasn’t sustainable, and the stock price declined over the next three months. By May 21, it had fallen all the way down to $12.30.
Could TPGY stock fall below its pre-SPAC-deal-announcement price of $10? Anything’s possible in the financial markets, and the sentiment certainly hasn’t been positive on TPG Pace Beneficial Finance lately.
A Global Company
So, TPG Pace Beneficial Finance is supposed to reverse-merge with EVBox Group.
That company designs and manufactures electric vehicle charging stations. Among U.S.-based traders, it seems to have received less attention than rivals ChargePoint (NYSE:CHPT) and Blink (NASDAQ:BLNK).
InvestorPlace contributor Ian Bezek suggests that EVBox is lesser-known because the company is based in Europe. I tend to concur with that argument.
I also agree with Bezek’s contention that EVBox “is global in scale and has offices in more than a dozen cities, including some in the U.S.,” so investors shouldn’t let geography alone dissuade them from considering EVBox/TPG Pace.
That all sounds very promising – an international-scale growth story in progress. What could possibly go wrong?
The business combination between TPG Pace Beneficial Finance and EVBox was announced on Dec. 10, 2020.
TPGY investors have been waiting patiently – or at least, some of them have. Presumably, others probably got tired of waiting and dumped their shares.
In an updated investor presentation from March, TPG Pace predicted, “Assuming that EVBox Group completes its 2020 audit on a U.S. GAAP basis by early May, we expect to close the business combination in June of 2021.”
Moreover, “On March 15, 2021, Pace Beneficial and ENGIE Seller amended the Business Combination Agreement (‘BCA’) to allow Pace Beneficial the ability to extend the outside closing date of the BCA from June 8th by 90 days to September 6th.”
So, TPG Pace gave itself some wiggle room in terms of the timeline. Fair enough, I suppose.
Fast-forward to May 17, and we find an SEC 8-K form from TPG Pace. Here are a couple of stomach-turning tidbits from that filing:
- “… the completion of the audited financial statements of EVBox Group as of and for the year ended December 31, 2020… will take significantly longer than previously anticipated.”
- “… the Company has significant doubts regarding the likelihood that the Business Combination will be completed on the terms currently contemplated or at all.”
That’s two “significant” reasons to avoid TPGY stock for the time being. As long as the merger deal is held in limbo, the stakeholders will be as well.
The Bottom Line
It’s perfectly okay to speculate on a SPAC stock. Just understand that “deal risk” is always there, until the merger is finalized.
Unfortunately, TPGY stockholders might have to wait an indefinitely long time for the completion of the EVBox merger deal.
And if you’re not a shareholder, you can choose to sit on the sidelines and just avoid this mess entirely.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.