In 2020, around 250 private businesses became public through mergers with special purpose acquisition companies (SPACs) that were already listed on an exchange. Now in 2021, that number has already reached 313. However, so far the popularity of SPACs has taken a hit for the most part, as many of them are in the red for the year. Because of that, today’s article will discuss seven of the most successful ones of the past year.
SPACs are shell companies that have gone public issuing units to finance an unspecified acquisition. Usually, they first go public for around $10. Then, when news of a potential merger deal surfaces, the share price typically shoots up as the Street buys the hype. Finally, following the closing of the merger, markets begin paying attention to actual earnings and valuation levels. As a result, the price often falls.
In an email to InvestorPlace back in April, James Angel — an associate professor at Georgetown University’s McDonough School of Business — noted the following:
“After the initial euphoria surrounding any new successful product, the market is coming to its new normal in which SPAC deals are being more closely scrutinized by investors and regulators. Investors should approach SPACs like they would any private equity investment. The key question to ask is whether they trust the manager to bring in a good deal. Does the SPAC’s management team have the right experienced people? What is their experience and track record? Do you trust them?”
Of course, it’s important do your due diligence with all investments — and especially SPACs. That said, there can be a lot of promise in these “sub-unicorn” companies that come public via a blank-check company.
As 2021 has shown, not all SPAC mergers are successful — the stock price of such entities can go below $10 within a few months. However, although the SPAC bubble seems to have burst in recent weeks, there are still many successful SPACs out there. So, here are seven SPACs that are still creating shareholder value. Let’s dive in and take a look at each one:
- Adapthealth (NASDAQ:AHCO)
- Betterware de Mexico (NASDAQ:BWMX)
- Draftkings (NASDAQ:DKNG)
- Opendoor (NASDAQ:OPEN)
- Open Lending (NASDAQ:LPRO)
- Repay (NASDAQ:RPAY)
- Skillz (NYSE:SKLZ)
SPACs of the Past Year: Adapthealth (AHCO)
52-week range: $15 – $41.58
One-year price change: Up about 48%
Adapthealth leases and sells personal healthcare equipment, such as mobility and oxygen equipment, bed lifts, walkers, sanitizing machines, diabetes and sleep apnea machines and more. The company works with healthcare professionals as well as insurance companies and serves over 800,000 patients annually.
In November 2019, DFB Healthcare Acquisition announced a reverse-merger with Adapthealth. At the time, the stock was around $10. Today, AHCO stock is just shy of $24.
The company released fourth-quarter and fiscal year 2020 metrics in early March. Revenue for Q4 was $348.4 million, up 133% year-over-year (YOY). The company’s net loss came at $31 million, or 47 cents per diluted share. In the Q4 results, management guided for revenue to be between $2.18 billion and $2.35 billion for this year. However, that guidance has since been raised to between $2.22 billion and $2.39 billion.
On the Q4 and full-year 2020 results, Co-CEO Luke McGee noted that Adapthealth was “benefiting not only from the underlying growth in the diabetes business in general, but also from our investments in our other chronic disease businesses such as obstructive sleep apnea.”
Additionally, on Feb. 1, AHCO shares saw a record high of $41.58. Today, though, shares have dropped slightly on the release of Q1 results. The current forward price-earnings (P/E) and price-sales (P/S) ratios for this pick of the SPACs are 19.96 and 1.45, respectively. Interested investors could consider buying into the share price around these levels.
Betterware de Mexico (BWMX)
52-week range: $6.70 – $49
One-year price change: Up about 434%
Dividend yield: 2.91%
Betterware de Mexico is a leading direct-to-customer company in Mexico. Its product portfolio includes various gadgets and products for the home, such as kitchenware, technology and mobility products.
In mid-February, BWMX released its Q4 and 2020 full-year earnings. Net revenues increased 229% YOY to 2.6 billion pesos ($128.7 million) in Q4 2020, up from 791 million pesos ($39.1 million) in Q4 2019. However, net income for Q4 decreased 45.2% YOY to 51 million pesos ($2.5 million). At the end of the year, cash and equivalents were 649.8 million pesos ($32.1 million).
On the results, the executive chair of the board, Luis Campos, commented, “We had an outstanding finish to a strong year of growth for our Company. We generated record sales and earnings for both the fourth quarter and fiscal year, exceeding the increased guidance we provided last November. The year marked significant milestones including growing revenues over 135% to $7.3 billion pesos and achieving record annual EBITDA margin of 29.8%.”
Today, BWMX stock is seeing record highs, most recently hitting $49. Currently, the shares sport a forward P/E ratio of 17 and a forward P/S ratio of 3.23. In the case of potential profit-taking, investors could consider buying this pick of the SPACs around $43 or even below.
SPACs of the Past Year: Draftkings (DKNG)
52-week range: $23.04 – $74.38
One-year price change: Up about 144.7%
Draftkings, a digital fantasy sports and iGaming group, was founded back in 2012 and has been one of the hottest SPACs recently. When it completed its reverse-merger in late April last year, investors took notice. Starting out, DKNG stock began trading at around $21 per share. In March 2021, they hit an all-time high of $74.38. Now, they are changing hands for around $53. However, despite the recent decline in price, the Street still likes this company.
Management released Q4 and fiscal 2020 results back in late February. For starters, Q4 revenue came at $322 million, an increase of 98% YOY. Net loss for the full year was $844.3 million, compared to the loss of $142.7 million in fiscal 2019 (Page 8). What’s more, basic and diluted loss per share for the year came at $2.76. Cash and marketable securities at the end of fiscal 2020 totaled $1.81 billion, up a massive $1.74 billion YOY.
DKNG stock’s forward P/S and price-book (P/B) ratios of 21.36 and 10.37 both point to a frothy valuation. However, investors believe in the growth prospects of this group. So far in 2021, Draftkings has been striking deals with leagues and broadcasting networks. Long-term investors could consider buying the dips.
Opendoor (OPEN)
52-week range: $10.55 – $39.24
One-year price change: Up about 64% (since mid-June 2020)
Real estate platform Opendoor Technologies generates revenue mainly through home sales. The group concentrates on “iBuying,” acquiring property directly from owners and selling directly to buyers. This company went public in late December 2020, after merging with one of Chamath Palihapitiya’s SPACs, Social Capital Hedosophia Holdings II.
Opendoor released Q4 and fiscal-year 2020 results on Mar. 4. Revenue came at $248.9 million. Non-GAAP adjusted net loss was $41.3 million, compared to a loss of $86.6 million for the prior-year period. Additionally, net loss per share was 49 cents. Finally, cash at the end of fiscal 2020 stood at $1.5 billion, increasing about $820 million YOY. On the results, CEO Eric Wu said the following:
“Since creating the category seven years ago, we have generated over $10 billion in home sales, served over 80,000 customers and demonstrated our ability to scale efficiently. While we are pleased with the progress and foundation we’ve built, we are just getting started.”
OPEN stock’s forward P/S and P/B ratios are 2.71 and 3.45, respectively. On Feb. 11, the shares hit a record high of $39.24. Today, they’re changing hands around the $17 to $18 level.
Wall Street would like to see this company get on the path to profitability. In the future, management is expected to introduce products and services related to mortgage financing, insurance and home maintenance. So, buy-and-hold investors could consider buying the shares around these levels.
SPACs of the Past Year: Open Lending (LPRO)
52-week range: $9.37 – $43
One-year price change: Up 269%
Next up on this list of SPACs is Open Lending, a company that provides risk-analytics solutions to financial firms such as regional banks and credit unions. The company was founded back in the year 2000. Since then, it has facilitated billions in automotive loans.
This company released its Q4 and year-end financials in early March. For the quarter, revenue went up from $26.1 million in Q4 2019 to $39.6 million. However, GAAP net income declined by nearly 13% YOY, coming in at $15.2 million. Diluted EPS was 12 cents for the quarter, while cash and equivalents stood at $101.5 million at the end of 2020.
On the results, CEO John Flynn commented, “The fourth quarter was a great end to a very productive year for Open Lending. During the quarter we reported a 19% increase in certified loans, a 52% increase in revenue and a 37% increase in Adjusted EBITDA compared to the fourth quarter of 2019.”
In the release, the company’s year-end guidance remained unchanged. Namely, this name’s top line is expected to be in the $184 million to $234 million range. Adjusted EBITDA is also anticipated to be between $125 million and $168 million. Finally, the company is expected to announce Q1 numbers on May 11.
In mid-February, shares hit a record high of $43. Now, they are trading for around $38. LPRO stock’s forward P/E and P/S ratios are 49.16 and 22.57, respectively. However, although these numbers show an overstretched valuation level, some investors are ready to pay for future growth. LPRO will likely create solid shareholder value in future quarters.
Repay (RPAY)
52-week range: $16.73 – $28.42
One-year price change: Up about 17.5%
Repay is a company that provides vertically integrated payment solutions. It allows customers to pay through a number of methods, including a mobile app, text and far more.
This company announced Q4 and 2020 year-end figures at the beginning of March. Total revenue came to $41.4 million for the quarter, a 23% YOY increase over the prior year. Additionally, adjusted net income was $13.5 million, an increase of 10% YOY, while adjusted net income per share was 17 cents. Finally, cash and equivalents stood at $91 million for the end of the year.
On the results, CEO John Morris stated the following: “Compared to 2019, card payment volume and gross profit increased 42% and 44%, respectively. In addition, we completed three acquisitions in 2020, further solidifying our position in the B2B space and adding new verticals and partners to our platform.”
Management expects to generate between $178 million and $188 million total revenue in 2021. Adjusted EBITDA is also estimated to be in the range of $75 million and $80 million next year.
In the past year, RPAY stock hit a record high of $28.42. Now, shares are trading for around $20. Currently, Repay’s forward P/E and P/S ratios are 33.80 and 9.07, respectively. In the future, the Street expects this pick of the SPACs to become a high-growth financial technology (fintech) bet in the payments processing space.
SPACs of the Past Year: Skillz (SKLZ)
52-week range: $9.84 – $46.30
One-year price change: Up about 61%
Last up on this list of SPACs is SKLZ stock. Like many entertainment and streaming businesses, mobile e-sports group Skillz has been a winner during the stay-at-home days of the pandemic. The company went public in December by merging with Flying Eagle Acquisition. The firm hosts e-sports tournaments with significant prizes, with developers building their franchises on its platform.
On May 1, SKLZ released Q1 metrics. For the quarter, revenue came to $84 million, up 92% YOY. Additionally, net loss was $53.6 million, compared to $15.5 million in the prior-year period. The company also had $613 million of cash on its balance sheet as well as “no debt at the end of first quarter 2021.” Finally, the Street was pleased to see that Skillz’s paying monthly active users (MAUs) grew 81% YOY.
CEO and founder Andrew Paradise noted the following on the results: “We are proud to report record-breaking first quarter results, giving us 21 consecutive quarters of revenue growth […] Our performance and strong growth trajectory gave us the confidence to increase investment in Q1 and raise full year revenue guidance to $375 million.”
Currently, SKLZ stock’s forward P/S ratio is 16.28. Its trailing 12-month P/B ratio is 24.37. In early February, the stock hit a record high of $46.30. Since then, though, it has come under pressure, falling to the current level between $15 and $16. Potential investors could find value around these prices.
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.
