Four SPACtacular Technologies

Four SPACtacular Technologies

April 6 2021

As CAPM 2.0 wrote last year in Memo 32, Special Purpose Acquisition Companies (SPACs) have become a hot new way for retail investors to make venture capitalist investments in emerging technologies. This week, we profile four of these SPACs, all of which are still in the R&D phase and may not have products in the market for months or years to come. All represent fascinating bets on the future of technologies and products that help with the clean energy transition. As you will read, their stock prices have been quite volatile and not for the risk averse:
1. QuantumScape’s Solid State Batteries [Ticker QS, Mkt Cap $18 billion]: QS created and patented a solid-state lithium-metal battery to make a step change in the capability of electric vehicle batteries. QS has spent ten years researching and developing the technology which they claim will allow for a much longer vehicle range, an increased service life, lower price, and safer battery. QS’s also claims it can charge to 80% capacity in less than 15 minutes. Volkswagen (VW) plans to use QuantumScape’s batteries in their 2025 EV fleet if QS can ramp up production in time. It is one thing to design a working prototype and quite another to manufacture at scale at a competitive price. The share price of QS reached an all-time high of $114 in December but has recently deflated to around $42. At its high, QS’s market cap was larger than Ford Motor Company.
2. Nikola’s Hydrogen Powered Trucks [Ticker NKLA, Mkt Cap $5 billion]: NKLA designs and seeks to manufacture electric and hydrogen fueled zero-emission vehicles, with an emphasis on large trucks. Nikola has plans for a vertically integrated business starting with facilities for renewable electric power generation (solar, wind and batteries), onsite conversion of H2O to hydrogen gas via electrolysis, and delivery of hydrogen to hydrogen fueling stations across the US highway system where it will be stored in tanks and pumped into Nikola trucks. Nikola contends that hydrogen fuel cell powered trucks are far lighter and more efficient than EV trucks powered with the large batteries needed for long haul routes. After an exciting launch last summer, the stock peaked at $79 a share but has come back down to $14 after highly credible allegations that management exaggerated progress toward producing vehicles at scale. As corporate America agrees to go to net zero, it will require its delivery trucks to run on clean energy. A new management team at Nikola is attempting to right the ship.
3. Lucid Electric Vehicles [Valuation $24 billion]: Lucid is a luxury electric vehicle company that intends to compete with Tesla. It has developed some handsome vehicles and is going to go public through the SPAC Churchill Capital Corp IV (ticker CCIV). Four highly anticipated Lucid models are under development that range in price from $69,9000 to $161,500. The first deliveries are now supposed to start in the second half of 2021. The most expensive car, the “Air Dream”, will have an astounding 1,080 Horsepower and 503 miles of projected range, similar to the Tesla Model S Plaid. Lucid Air’s 900V+ charging system claims “to fill more miles of energy per hour than any other EV on the market — up to 300 miles of charge can be delivered in 20 minutes.” CCIV’s share price jumped from $10 to over $50 on the news of its planned investment in Lucid and, like many other SPACs, has now come back to earth, settling recently around $23.
4. Danimer’s Biodegradable “Plastic” [Ticker DNMR, Mkt Cap $3 billion]: Danimer is a bioplastics company that went public last year through a SPAC. It is focused on biodegradable materials to be used in place of plastic, which is virtually indestructible and will forever be with us. Danimer, with its backer PepsiCo, is working on replacing Pepsi’s current product line which is heavily dependent on single use plastic bottles and other packaging. Plastics are manufactured in petrochemical plants that produce massive amounts of fossil fuel driven CO2 emissions, other greenhouse gases, and all sorts of other toxic pollutants seriously harmful to human health. The Danimer materials are certified as biodegradable in water and are FDA approved for food contact use. This biopolymer can be used for additives, extrusion coatings, extrusion lamination materials, film resins, injection molding, and thermoforming resins. The stock price topped out over $60 and is currently trading at $38.

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May 3 2022

Last week we attended the largest Offshore Wind conference in North America. In short: we were blown away. The companies involved and emerging technologies on display all create a compelling forecast for investors.

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Today we delve into a Barron’s interview with Gary Black, the well-regarded Wall Street pro, and reveal why his target price of $1,100 per share for Tesla is not as aggressive as it may first appear.