The Lucid Air prototype electric vehicle, manufactured by Lucid Motors.
David Paul Morris/Bloomberg
Special purpose acquisition companies are still snapping up firms in 2021 after an amazing year for SPAC mergers in 2020. A few potential attractive targets remain.
Lucid Motors, Virgin Orbit, and Hyzon have yet to find their SPAC dance partner, but all three have been linked to an existing SPAC.
Sometimes referred to as “blank-check companies,” SPACs raise money in an initial public offering and then search for an operating company to merge with. Once the transaction closes, the merger target becomes publicly traded.
Friday, stock in SPAC Decarbonization Plus Acquisition (ticker: DCRB) soared more than 18% after Bloomberg reported the company would merge with Hyzon. Hyzon is a fuel-cell-powered commercial vehicle maker—similar to Nikola (NKLA). Hyzon already has trucks in commercial service.
The deal hasn’t been formally announced, and neither firm was available to comment on the report.
Then there’s luxury EV maker Lucid Motors. Churchill Capital Corp. IV (CCIV) is the SPAC linked to Lucid, but nothing has been formally announced. Churchill stock rose more than 15% Friday, likely in sympathy with Decarbonization SPAC stock.
Investors speculated that VG Acquisition (VGAC), a SPAC associated with Richard Branson, would consider merging with space-launch services company Virgin Orbit.
VG Acquisition came to terms with genetics firm 23andMe Thursday. That doesn’t mean Orbit won’t generate SPAC interest. Space-logistics provider Momentus and launch-service company Astra have recently agreed to SPAC mergers.
Investors have already bid up Churchill and Decarbonization stocks. They should proceed with a little caution, however. The ultimate price of the stock will be a function of the valuation of the acquired companies. For example, the market has valued EV companies with SPAC partners, such as Fisker (FSR) and Faraday Future, at roughly $4 billion to $7 billion.
Market valuations for Mometus and Astra—as well as Aerojet Rocketdyne (AJRD), which recently agreed to be purchased by Lockheed Martin (LMT)—range from roughly $4 billion to $5 billion.
Investors should pay attention to pro forma market cap when deals are announced, keeping recent valuations in mind, to decide whether the SPAC stocks that are trading higher Friday still represent good values.
Write to Al Root at [email protected]
