Sso-called ad hoc acquisition company (After-sales service) the stocks and the companies they merged with have packed at least a year of drama in the first five months of 2021. We started the year with investors caught in a PSPC craze, causing stocks to skyrocket. This, in turn, fueled investor interest in new SPACs, pushing stocks higher and higher.
The air has been on the ball in recent weeks, however, and in hindsight some of the top valuations look ludicrous. But the truth is, there are some intriguing companies that have gone public through PSPCs, and there will be long-term winners who come out of this fad.
Here’s why three Motley Fool contributors are watching AppHarvest (NASDAQ: APPH), Churchill Capital Corp. IV (NYSE: CCIV), and VG acquisition group (NYSE: VGAC) very carefully after the sale.
Image source: Getty Images.
This seedling has growth potential
Lou whiteman (AppHarvest): Full Disclosure: There are few companies that trade in the US markets that I wish to see succeed more than AppHarvest.
The company, which went public on February 1 through a merger with SPAC Novus Capital Corp., is an agricultural technology start-up that is trying to bring sustainable agriculture to the United States. He’s trying to help solve a huge global need – feed a constantly growing world – in a green way. As an added bonus, AppHarvest does this in Appalachia, a part of the United States that is in desperate need of an economic boost.
The company is still in its early stages, trying to gain a foothold in what is already a massive industry. AppHarvest posted only $ 2.3 million in revenue during its first quarter as a publicly traded company, selling 3.8 million pounds of tomatoes from its flagship plant in Morehead, Ky. By the end of 2025, AppHarvest intends to have 12 high-tech farms producing over 40 million pounds of tomatoes per year.
So far, the stock has been caught in a tussle between those drawn to the promise and those afraid of overpaying when there is still a lot that could go wrong. Today, AppHarvest shares are valued at a 48% discount from their starting point. This is actually an improvement from a few weeks ago when it was down 67%.
Image source: AppHarvest.
Even after the sale, AppHarvest still has a market cap of $ 1.85 billion, a ridiculous 800 times the revenue it has generated so far. This figure is misleading, however, as AppHarvest is rapidly expanding its footprint and is only just starting to generate sales. But it will take much more than the output of 12 farms to reach the current assessment.
There is also a lot of potential competition to worry about. While few great United States agricultural producers are now experimenting with vertical farming, if AppHarvest is able to prove the concept, many large companies have the resources to follow in their footsteps.
I have no doubts that AppHarvest will change the world by moving the United States towards sustainable agriculture. What has been less clear to me is whether the company will be a winner or a footnote in the transition. With stock prices falling and tomatoes now growing on the vines, the deal is easier to do than it was in February.
AppHarvest is still risky enough to be limited to a small speculative part of a well-diversified portfolio. But for those who understand the risk, this is an intriguing time to look at the stock.
There are EV start-ups, and there are companies like Lucid Motors
Jean Rosevear (Churchill Capital IV / Lucid Motors): Churchill Capital IV, the special purpose acquisition company set to merge with Lucid Motors, peaked in February following the official announcement of the deal. He has long since fallen, long since – around 64% as I write this Thursday afternoon – but EV investors rushed to buy the stock for good reasons earlier this year, and those reasons are still good.
Of course we have heard a million times that such and such electric vehicle start is the following You’re here. “Lucid – a well-funded startup that will launch its first electric luxury sedan later this year – comes closer to that description than most.
- Lucid CEO Peter Rawlinson was chief engineer on Tesla’s revolutionary Model S. He knows what it takes to market such a car, he has learned from Tesla’s mistakes and he has built a great management team of veterans of Apple, Ford Motor Company, Audi, Mazda Engine, and Ferrari, among others.
- Lucid already has a factory. The company’s plant in Arizona was designed to be built in stages, allowing Lucid to increase capacity as demand increases. Stage one is complete, and Lucid is preparing to begin deliveries of its Air luxury sedan this fall.
- Lucid had planned to start production about six months earlier, but delayed after one of his advisers suggested additional pre-production tests to ensure quality. This advisor? Only the most impressive automotive executive of the past decade, former Ford CEO Alan Mulally. (I got to know Mulally a little bit when he was at Ford. When he suggests something like that, you do – thankfully.)
- Lucid has truly innovative technology, perfected in the Formula E electric vehicle racing series over the past few years. Among other things, the company has an innovative battery module optimized for mass production, as well as proprietary motors and inverters and cutting-edge fast-charging technology: the premium Lucid Airs will be able to add 300 miles of range in just 20 minutes. .
The Lucid Air will start at just under $ 70,000 (after tax credits) when it begins shipping this fall. Image source: Lucid Motors.
For now, Lucid is positioned in the high end of the market, above Tesla’s offerings, with what he calls a “post-luxury” California aesthetic. The Air, and a related big SUV that will follow, is not opulent in the German-luxury car sense. Instead, they’re airy, with intricate detailing and powertrains that should deliver effortless (and quickly) performance.
Lucid is not likely to become the biggest automaker in the world, but it has established a very profitable niche with promising products. When Churchill Capital IV shares were trading over $ 50, I had qualms; now, with its market cap of around $ 6 billion, that sounds like an intriguing buy.
This DNA company could be a gold mine
Rich Smith (VG Acquisition Corp): I admit that I am very tried to choose a “space stock” this week – and there is lots of SPAC space who crashed to choose. Anyway, today I’m going to pick “the one who ran away” – VG Acquisition Corp.
I suspect most investors were like me in thinking that Virgin Galactic founder Sir Richard Branson would likely use his VG Acquisition vehicle to go public with rocket company “Virgin Orbit” – until VG Acquisition announced. she would buy and IPO genetic information warehouse 23andMe, instead. But while I was disappointed to miss the opportunity to invest in Virgin Orbit, I actually think VG Acquisition’s new target will prove to be an even better choice.
Consider this: While only number 2 in genetic records related to family history (Ancestry.com has more), 23andMe has a database of 10.7 million genetic records focused on predicting genetic diseases, a base of data much bigger than its nearest competitor in this space. In addition, 23andMe plans to grow this database to 16 million records by 2025. If it maintains its current participation rate of 80% (customers who have both ordered genetic testing and authorized use data for scientific research purposes), this will increase the company’s DNA data treasure by 50% to 12.8 million records in just four years.
Importantly, 23andMe paid nothing to acquire this data. He came to the company for free, along with the service they provided and billed, to prepare custom DNA reports for their clients. Yet now 23andMe can turn around and lease this data to pharmaceutical companies, who will pay for the privilege of using it to make further advances in medicine.
Four months ago, investors thought this opportunity was worth at least $ 16 per share, but today that same opportunity can be invested for the low and low price of just $ 10 per share. I call it a good deal.
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Jean Rosevear owns shares of Apple and Ford. Lou whiteman owns shares of Ford. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares and recommends Apple and Tesla. The Motley Fool recommends AppHarvest, Inc. and recommends the following options: $ 130 long calls in December 2021 on Ferrari, $ 120 long calls in March 2023 on Apple, and $ 130 short calls in March 2023 on Apple. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.