What happened
Shares of electric-vehicle (EV) companies going public through special purpose acquisition company (SPAC) mergers are starting the new year where they left off in 2020. Three that are moving sharply today are Northern Genesis Acquisition (NGA +0.00%), Switchback Energy Acquisition (SBE +0.00%), and XL Fleet (XL +0.25%). As of 11:15 a.m. EST Monday, shares moved as follows:
- Northern Genesis was up 6%;
- Switchback Energy dropped 9%;
- and XL Fleet was down 15%.
So what
XL Fleet recently completed its merger, and shares spiked after the transaction closed on Dec. 22. Switchback Energy has plans to merge with leading EV charging infrastructure company ChargePoint in the near future. And Northern Genesis is getting closer to finalizing its merger with Canadian EV truck and bus maker Lion Electric.
Image source: Getty Images.
Today, Northern Genesis announced that Lion Electric filed its preliminary registration statement with the Securities and Exchange Commission (SEC). This brings the merger one step closer to completion, and the boards of directors of both companies have unanimously approved it. The merger should close in the first quarter of 2021, but today's filing isn't a surprise, as plans for the merger have been previously announced.
Now what
Investors in SPACs related to EV companies have been driving up shares, only to realize the operating company is being overvalued. Shares of Northern Genesis and Switchback Energy are up 144% and 89%, respectively, in the last three months as the mergers were announced.
Shares of XL Fleet soared after its merger with Pivotal Investment II closed in late December. At the high of about $35 per share, XL was valued at a fully diluted market cap of over $5 billion. The company estimates 2021 sales will be $75 million, ramping up to $1.4 billion by 2024. Investors likely realized the spike in valuation was too fast, and shares have dropped by about 40% from its highs.
ChargePoint charging station. Image source: ChargePoint.
Switchback plans to close on its merger with ChargePoint in early 2021, and investors have been driving up shares of the SPAC in anticipation. ChargePoint is rapidly growing its charging station network in the U.S. and expanding in Europe. It expects sales of its charging ports to grow by seven times through 2026. But investors drove shares up beyond what is reasonable. Even after today's drop, the combined company would be valued at over $9 billion, triple what the equity value was predicted to be when the transaction was announced.
Once the companies file with the SEC, investors can see the final amount of shares being registered. Investors piling into shares of Northern Genesis based on the prospects of Lion Electric's battery-electric buses and trucks would be wise to wait for the final details on the merger transaction, or at least ensure initial purchases are starter positions. Many of the SPAC mergers are being more highly valued than they should ahead of the transaction closures.
