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Why This EV SPAC's Stock Soared Today

By Howard Smith - Jan 22, 2021 at 10:26AM

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Climate Change Crisis Real Impact announced a merger with electric-vehicle charging company EVgo.

What happened

Shares of Climate Change Crisis Real Impact I Acquisition (CLII) soared Friday morning after the company announced plans to merge with electric-vehicle (EV) charging network provider EVgo. As of 10 a.m. EST, shares of the special purpose acquisition company (SPAC) were 65% higher. 

So what

The combination with the SPAC will provide EVgo with $575 million in proceeds to be used to facilitate the growth of its network. The resulting valuation of the newly combined company is expected to be $2.6 billion, based on the SPAC's initial price. 

EVgo is a leading owner and operator of fast charging stations in the U.S. EVgo has partnerships with automakers including General Motors (NYSE: GM) and Tesla (NASDAQ: TSLA), and it focuses on fast charging stations in commercial settings like grocery stores and shopping centers. Property partners include Kroger, Albertsons, and convenience store chain Wawa. 

EVgo charging station

Image source: EVgo.

EVgo is a subsidiary of private power and energy infrastructure company LS Power. The decade-old charging network provider has "become the largest platform for EV public fast charging in the U.S.," the company said in a statement. The company's full fast charging network is 100% powered by renewable electricity. 

Now what

Investors are obviously excited to try and get in on the action today. EV charging infrastructure likely has a long runway of growth. But there is competition, and estimates made by EVgo for the sector are ambitious. It bases its financial estimates on an EV market that will be almost 100 times larger by 2040 than it was in 2019. 

While this is possible, investors should realize an investment today takes some of that growth into account. After today's spike, the enterprise value of the company is close to $5 billion, or about eight times 2025 revenue estimates. This should put it squarely into the speculative portion of a portfolio. 

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