I apologize if you're burned out from reading about special purpose acquisition companies (SPACs). It does seem like everywhere you look these days, SPACs are crawling out of the woodwork. And many of them aren't very attractive.
The reality, though, is that there are still some good SPACs mixed in with the duds. And there are even a few that could be massive winners over the next few years. Here are two SPAC stocks that I think could realistically be 10-baggers.
A different kind of space company
William Shatner talked about space being the final frontier on the old Star Trek TV series. He was referring to outer space. But there's a highly lucrative frontier with inner space, too. I'm talking about the physical space inside of buildings and homes.
Gore Holdings VI (GHVI) is a SPAC that's getting ready to profit from the inner-space opportunity. It plans to merge with spatial-data pioneer Matterport in the second quarter. What exactly is spatial data? It's the transformation of physical spaces and their contents into 3D virtual models.
Matterport single-handedly defined the spatial-data category in 2011. It has digitized over 10 billion square feet of space in millions of buildings in more than 150 countries. In doing so, Matterport has built the biggest spatial data library in the world.
How can Gore Holdings VI/Matterport become a 10-bagger? It's pretty simple. The company makes its money primarily through a software-as-a-service model that creates constantly increasing recurring revenue as new customers sign up. And a lot of new customers are signing up: Matterport's subscriber base expanded more than 500% last year.
Matterport has attracted more than 250,000 customers so far, including over 13% of the Fortune 1000. However, there's still a big untapped market to go after -- 4 billion buildings and 20 billion spaces. The company estimates this represents a total addressable market of $240 billion.
No, Matterport won't capture this entire market. But Gore Holdings VI can easily deliver a 10 times return with Matterport grabbing only a sliver of the pie.
The SPAC stock's market cap currently stands at under $750 million. Assuming a price-to-sales ratio of 5, Matterport would need to claim a market share of only around 0.6% to be a 10-bagger. The company thinks it will be roughly halfway there by 2025. And a 10-times return could be too conservative: "Couch Investor" podcaster Neil Rozenbaum thinks Matterport could deliver a 15 times gain over the long run.
Rajiv Shukla has already taken one promising company public via a SPAC merger with DermTech. Now, his Alpha Healthcare Acquisition Corp (AHAC) SPAC hopes to bring another healthcare winner to market with its planned merger with Humacyte.
Humacyte hopes to revolutionize medicine with its off-the-shelf bioengineered human tissue. The company focuses especially on human acellular vessels (HAVs). These HAVs are bioengineered blood vessels that are highly resistant to infection.
So far, Humacyte has successfully completed five phase 2 clinical studies evaluating the use of HAVs in hemodialysis access and peripheral arterial disease. It now has three phase 3 studies in process for vascular trauma and arteriovenous access. These studies are expected to wrap up in 2023. And that's when Humacyte hopes to launch its first product targeting vascular trauma.
Over the next six years, the company thinks that it will be able to win regulatory approvals for bioengineered tissues for use in several other indications. The most ambitious of these is a biovascular pancreas for individuals with type 1 diabetes.
Humacyte estimates that its HAV products could generate peak annual sales of more than $12 billion. This assumes, of course, that those products win regulatory approvals. To be sure, there's a risk that won't happen.
However, the company's chances appear to be pretty good at this point. Over 430 patients have been treated with its HAVs thus far in clinical studies. That's more than 800 patient years of clinical data. And no patient has experienced an immunological rejection.
Alpha Healthcare Acquisition Corp's market cap is below $200 million right now. It's easy to envision the healthcare stock becoming a 10-bagger within a few years if Humacyte's technology proves to be successful in clinical studies. This SPAC stock appears to be a high-risk, potentially high-reward alternative that aggressive investors will probably want to consider.