Please ensure Javascript is enabled for purposes of website accessibility

Why Northern Genesis Acquisition Stock Fell 21.7% in February

By Keith Noonan - Mar 8, 2021 at 10:21AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The SPAC stock is falling ahead of its big merger.

What happened

Shares of Northern Genesis Acquisition (NGA) slumped 21.7% in February, according to data from S&P Global Market Intelligence. A big pullback for electric vehicle (EV) stocks is pressuring the valuation of the special purpose acquisition company (SPAC).

NGA Chart

NGA data by YCharts

Northern Genesis is on track to merge with EV specialist Lion Electric before the end of March. The deal will take the newly formed company public under the Lion banner and see its stock trade on the New York Stock Exchange under the ticker symbol LEV. EV stocks have commanded lofty price-to-sales multiples for much of the last year, but it seems investors' appetite for speculative, growth-dependent plays in the category may be waning. 

A Lion Electric Commercial Bus.

Image source: Lion Electric.

So what

SPACs have become an increasingly popular vehicle for taking companies public over the last year, but many stocks in the category have seen substantial pullbacks following initial merger-announcement pricing pops. While Lion Electric's long-term outlook remains speculative, there are some promising early demand indicators that set it apart from other SPAC merger targets. 

Lion Electric has a contract to supply Amazon (AMZN 4.11%) with 500 EV trucks from 2021 through 2025, with an option to extend the delivery deal through 2030. Amazon also has an option to purchase a 20% stake in Lion Electric -- an interesting, if tentative, vote of confidence from the e-commerce and cloud computing giant.

Northern Genesis also announced last month that Lion had received an order from the Los Angeles Unified School District for 10 of its all-electric LionC school buses. However, the announcement was overshadowed by the broader pullback for EV stocks. 

Now what

The sell-off for Northern Genesis stock has continued in March. The company's share price is down roughly 27% in the month so far. 

NGA Chart

NGA data by YCharts

Northern Genesis stock is still up roughly 58% from market close on the day of its initial public offering last August, and investors should proceed with the understanding that the company's share price looks primed for more volatile swings in the near term. Northern Genesis now has a market capitalization of roughly $610 million. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Northern Genesis Acquisition Corp. Stock Quote
Northern Genesis Acquisition Corp.
NGA
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$2,307.37 (4.11%) $91.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
338%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.