The Charging Network Wars
SBE announced it will SPAC out ChargePoint, an electric vehicle infrastructure company, at a $2.4B valuation. Investors could own ~20% of ChargePoint as the charging-network war heats up. Despite the deal announcement in September, the stock rallied +42% over the past week — closing at $37.13 per share. Enthusiasm for EV infrastructure sparked a rally in CharePoint’s competitor, Blink Charging ($BLNK), which jumped 24% to a $900M valuation over the past week — trading at +200x prior 12 months sales.
Bull case: Investors are betting on the lucrativeness of a first mover advantage as charging stations can generate recurring, stable revenues by securing highly trafficked locations, effectively carving out local monopolies. These charging network wars are not dissimilar to the ongoing Uber vs Lyft ridesharing wars. Benefiting from it’s early market-blitz (and regulatory malfeasance), Uber has secured its spot as the preferred ride-sharing platform with a dominant 71% US market share. And finally, the continued consumer adoption of EVs will lead to an outsized demand for convenient charging stations.
Bear Case: A recent McKinsey study pegged global EV penetration at 2.5% of total car sales in 2019, an improvement of 30bps from 2018. The market is nascent and YoY growth has slowed to 9% in 2019 (vs 65% in 2018) as the US tax incentives phased out. To invest in either, you’d have to stomach several quarters of front-loaded capital + R&D expenses, attempts to wrangle a fragmented customer base, and competition against Tesla’s Super Charger Network. But that’s not to say, there isn’t money to be made in the short-run.
The Next Battery Day
KCAC is finalizing a deal to SPAC out QuantamScape under the ticker $QS. QuantamScape is a solid state lithium-ion battery company which claims a 80% charge in less than 15 minutes, high energy density, and an 82% improvement vs today’s lithium ion batteries. Automakers who’ve under-invested in their EV programs have been bailed out from their own Innovator’s Dilemma — they’ll continue avoiding battery R&D costs while asserting their dominance in combustion engine technology and sales. By modularizing battery components, QS challenges the long-standing belief that an integrated automaker like Tesla will have the most favorable economics. Over the past week, KCAC traded up+82% to $23.50 per share.
Bull Case: A gust of positive tail-winds: (i) Expansionary total addressable market (TAM), (ii) partnership with the largest automaker: Volkswagen, and (iii) a management team bolstered with battery domain expertise. Like every other EV SPAC, QS is likely taking advantage of hyped market conditions but if they’re willing to open their company to public scrutiny, they must have a defensible product under the hood.
‘QuantumScape’s relationship with Volkswagen dates back to 2012 and includes collaboration on battery cell development, the testing of prototype cells, previously announced funding commitments of over $300 million...’ (Press Release)
Bear Case: The company will register its first year of revenue in 2022. Sales are projected to ramp from $14M in 2022 to $6.4B by 2028. The question on everyone’s mind: Can they produce their battery packs at scale to meet their projections? Unproven, but they certainly have the management chops to figure it out. My prediction is that QS will rally to ~$50 by end of year after plummeting back to ~$20 as investors awaken from their collective delusion and digest the financial projections.
- LGVWU: Longview Acquisition Corp agreed to SPAC out Butterfly Networks. Butterfly Networks produces Butterfly iQ, an ultrasound transducer that can perform “whole body imaging’ with a single handheld probe using chip technology that connects to a mobile phone or tablet. (company website) Healthcare has ballooned to 17.7% of US GDP and further cost increases would be untenable as innovation has crumbled cost structures in adjacent industries. As healthcare companies vertically orient in a cost-reducing exercise, companies like Butterfly Networks could offer additional opportunities to right-size the cost of healthcare. Also, it doesn’t hurt to be backed by the Gates Foundation. The SPAC is trading at $16.60 per share gaining 20% over the past week.
- PSTH: Enter Bill Ackman’s mega, $3B SPAC. Media outlets have reported Mr. Ackman meeting with Silicon Valley unicorns — notably, Airbnb and Stripe. Both companies are eyeing IPO debuts into public markets. Despite no concrete target for $PSTH, the ticker has gained 11% over the past month as investors are betting on Mr. Ackman’s deal-flow and financial acumen to outperform. He recently bought $27M of Credit Default Swaps prior to the pandemic and turned it into $2.7B in just 30 days. (StreetFins). Can lightning strike again?
What SPACs are on your watch list? 👀 Comment 🔽