What happened
Shares of Switchback Energy Acquisition (SBE), CIIG Merger (CIIC), and Electrameccanica Vehicles (SOLO -3.55%) all dropped more than 15% today before mounting a recovery.
As of 11:25 a.m. EST, Switchback shares are down 9%, CIIG shares are only 2% lower, and Electrameccanica shares have swung to a gain of 4%. This morning is an example of the type of volatility to expect in this sector.
So what
The group is part of the hot electric-vehicle (EV) sector that has seen shares soar in recent months. But investors are beginning to take profits, thinking that shares have run too far, too fast. In just the last month, shares of these companies have gained between 90% and 150%, including a recent retrenchment.
A look at the individual businesses should give investors a more sober view of why those sharp gains are beginning to reverse. CIIG is a special purpose acquisition company (SPAC) merging with Arrival, a U.K.-based maker of electric vans and buses, which has yet to begin manufacturing its products.
Arrival electric bus and van scheduled to begin production in Q4 2021. Image source: Arrival.
Switchback Energy, also a SPAC, will be bringing EV charging station company ChargePoint public this month. ChargePoint does have a widespread, and growing, business already.
Electrameccanica sells single-seat, three-wheeled electric vehicles called the Solo with a 100-mile maximum range and 80 mph top speed. The company also will begin offering a two-seat electric sports car. But third-quarter revenue of about $232,000 makes a $545 million market capitalization hard to justify for the stock.
Now what
Each of these companies operates in a niche that could grow as EV popularity grows. Urban transportation using EVs will likely continue to gain customers. And charging station networks will almost certainly continue to expand globally.
Switchback's combination with ChargePoint will result in a company valued at $2.4 billion. ChargePoint believes its 2019 revenue of $145 million will grow to over $2 billion by 2026.
An investor looking for a diverse group of EV companies might be interested in Arrival, Electrameccanica, ChargePoint, or all three. Investing through the SPACs CIIG and Switchback Energy is the only way to be in Arrival and ChargePoint at the moment.
But the stocks are going to be volatile, particularly when share prices rise as fast as these have recently. For those who believe there will be significant growth in electric, urban transit vehicles, and charging station networks, there can be a place for these in an investment portfolio. Just be sure to consider them speculative investments at this point.
