SPAQ proves that you shouldn’t fall in love with stocks – Idaho Reporter


SPAQ proves that you shouldn’t fall in love with stocks

SPAC companies just haven’t been able to get any respect lately. Share price of Spartan Energy Acquisition (NYSE:SPAQ) proves my point.

Spartan Energy Acquisition Corporation (NYSE: SPAQ), commonly referred to as SPAQ, has been gaining a lot of traction lately on talks of a reverse merger with Fisker Corporation to become the latest EV player to list on the markets through the SPAC (Special Purpose Acquisition Company) route.

SPAC’s have become very popular of late as they are a quicker and hassle-free way of raising funds compared to the traditional IPO route. SPAC’s have been particularly popular among EV manufacturers due to problems and skepticism these companies face when raising money through an IPO. These relate to their massive capital expenditure and the challenge of scaling production. 

Other new EV companies such as Nikola (NASDAQ: NKLA) and Hyliion (NYSE: HYLN) have also taken the SPAC route to a public listing. 

Fisker’s claims

Fisker has been in the news lately after the launch of its Fisker Ocean SUV, on which the company has made some bold claims. 

According to the company, it will be the most sustainable vehicle on the planet and carry a price tag of nearly $38,000 (buy-it-now) or $379 a month (lease). That puts it in direct competition with the US’ current highest-selling EV, the Tesla Model 3 which is a much smaller mid-size sedan. 

These claims have drawn their fair share of skeptics as Tesla (NASDAQ: TSLA) faced some big manufacturing issues and delays when trying to scale Model 3 production and bring prices down, despite Tesla being a much larger and more vertically integrated EV manufacturer. 

Fisker has so far received about 33,000 registrations for the Ocean. 

Fisker’s business model

However, unlike Tesla, which designs and manufactures the car itself, Fisker plans to use the funds it raises to design the car and then outsource the capital-intensive manufacturing process to a large manufacturer. 

In CEO Henrik Fisker’s words, “We think of the future of automotive the way Apple thought of phones. Tim Cook isn’t walking the factory floor at Foxconn. We’re going to outsource the manufacturing. {Large automakers} haven’t perfected the electric car, but they’ve perfected manufacturing, so why not take advantage of that? This will enable us to take a vehicle from a sketch to launch in an environment that is consistent with our asset-lite, digital-first philosophy”. 

Until recently, the company was in talks with Volkswagen to manufacture the Ocean, but the deal fell through and now the company has inked a deal with Magna International (NYSE: MGA) for late 2022 production in Europe. 

Fisker is not the only EV company to take the outsourcing approach. Nikola (NASDAQ: NKLA) is also in talks with GM (NYSE: GM) to outsource manufacturing. (Investor Place)

Fisker-SPAQ merger

SPAQ has announced that it will hold a special meeting on the 28thof this month to vote on the merger between SPAQ and Fisker Automotive. 

If the transaction is approved Fisker will be listed on the NYSE under the ticker FSR.

EV Valuations

Despite the recent rally in EV stocks, investors will inevitably start to question the valuations at which these stocks are selling, given that companies like Hyliion, Nikola, and Fisker haven’t delivered a single EV to date. 

In fact, these companies are at least 1.5 to 2 years away from delivering their first vehicle.

Investors should therefore be cautious.

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