Backed by billionaire Bill Ackman, Pershing Square Tontine (NYSE:PSTH) may have been one of the hottest special purpose acquisition companies (SPACs) earlier this year. However, after what played out last month, that’s certainly no longer the case.
As fellow InvestorPlace contributor Ian Bezek recently wrote, this name’s deal to purchase a stake in Universal Music Group has fizzled out due to regulatory issues. With that, the billionaire hedge fund manager, activist investor and occasional SPAC promoter has decided to throw in the towel. Instead of going forward with a deal, PSTH will liquidate, returning $20 per share in cash to investors as well warrants in a new entity: Pershing Square SPARC Holdings.
Investors who bought PSTH stock at its offering price are basically breaking even. But those who got in when the hype was at its peak? They’re taking a big loss; at one point PSTH traded for as much as $34.10 per share.
In general, it has been tough to find profitable opportunities in SPACs since the bubble burst back in February. So, should you skip out on the blank-check space completely? Not so fast.
Ackman’s blank-check vehicle may have been a dud. But these seven SPACs — five of which have “deSPACed” and two of which have pending deals — still stand to become winners in the long-term.
- Austerlitz Acquisition (NYSE:AUS)
- Avepoint (NASDAQ:AVPT)
- Fisker (NYSE:FSR)
- Hyzon Motors (NASDAQ:HYZN)
- 23andMe (NASDAQ:ME)
- Microvast (NASDAQ:MVST)
- TPG Pace Beneficial Finance (NYSE:TPGY)
SPACs to Buy: Austerlitz Acquisition (AUS)
In recent weeks, iGaming and online sportsbook SPACs have been making a comeback. For example, Golden Nugget Online Gaming (NASDAQ:GNOG) has soared, thanks to competitor Draftkings (NASDAQ:DKNG) offering to take it over. Rush Street Interactive (NYSE:RSI) has moved higher on this gambling buzz as well.
When it comes to AUS stock, though, it won’t officially become an online gambling play until later this year. Currently, AUS has a pending deal to merge with Wynn Resorts’ (NASDAQ:WYNN) iGaming and sportsbook unit, Wynn Interactive. Last month, I discussed how this deal could benefit WYNN stock, enabling investors to get a better handle on its valuation. But buying this blank-check vehicle itself could also end up being a profitable move.
Per projections in its May investor presentation, the soon-to-be Wynn Interactive is set to grow revenues from $96 million this year to $708 million in 2023 (Page 35). Moreover, longer-term projections predict iGaming will become a $45 billion market by 2030. That implies that this operator, with eventual market share of 10% to 15%, could eventually generate $3.6 billion to $5.4 billion in annual revenue as well as adjusted annual EBITDA between $1 billion and $1.5 billion. That’s not bad considering the company’s implied post-merger enterprise value of $3.2 billion.
Backed by Bill Foley (who was behind high-profile SPACs like Paysafe (NYSE:PSFE)), AUS stock now trades just below $10 per share. This one is definitely a blank-check play to consider.
Avepoint (AVPT)
Since closing on its blank-check deal in July, shares in the former Apex Technology Acquisition have dipped from around $12 to $10. Yet, while it hasn’t done well for investors lately, AVPT stock may be one of the recent SPACs to keep an eye on.
First, this independent Microsoft (NASDAQ:MSFT) vendor is in the right business at the right time. As InvestorPlace broke it down earlier this year, the company’s main business is providing data migration services for businesses moving from legacy systems over to Microsoft’s cloud-based 365 platform. A massive total addressable market, the company has plenty of room to continue growing its sales in the coming years.
Secondly, shares are reasonably priced relative to this name’s high projected growth. At current prices, the company has an enterprise value of around $1.74 billion (Page 20). Admittedly, that’s a bit pricey compared to its near-term results ($194 million in estimated sales for 2021, $256 million in estimated sales for 2022). But, if AVPT continues to grow at a 30% annual clip? Down the road, today’s valuation could look more than reasonable in hindsight.
Lastly, as seen from its results from the quarter ending Jun. 30, it’s clear this pick of the SPACs could actually live up to its projections. The company saw year-over-year (YOY) sales growth of 38%, with annual recurring revenue (ARR) up 33% YOY as well.
Sure, Avepoint may continue to deliver middling performance in the short term. Buzz is low when it comes to AVPT stock and other “deSPACed” names right now. But that only provides an ideal entry point before investors bid this one up again.
SPACs to Buy: Fisker (FSR)
As I’ve discussed before, FSR stock is an underrated electric vehicle (EV) play. True, it may not have the same, Tesla (NASDAQ:TSLA) challenging potential as Lucid Motors (NASDAQ:LCID). However, unlike its hyped-up peer whose valuation more than reflects the possibilities, this name offers potential at a decent price.
If FSR manages to prove skeptics wrong and deliver on its promises, shares could see tremendous appreciation over the next few years as the company begins production of its flagship Ocean SUV. How massive could the upside be here? Morgan Stanley analyst Adam Jonas is bullish. Given its outsourcing deal with Magna (NYSE:MGA), Jonas believes Fisker will be able to deliver its first vehicles in 2022. He gives it a “base case price target” of $40 per share and a “$90 bull case price target.”
Of course, some investors have dilution concerns due to Fisker’s recent $600 million convertible bond offering. Yet, with its use of capped call transactions, potential dilution may be limited. Trading for around $13 today — well below what it could trade for a few years from now — this is one of the better “deSPACed” electric vehicle plays out there.
Hyzon Motors (HYZN)
Hyzon Motors saw a significant slide shortly after going public via its SPAC. In fact, this hydrogen EV maker fell to as low as $6.02. However, thanks to recent game-changing news, HYZN stock has moved back to levels around its initial $10 per share offering price.
What was the news? Well, as InvestorPlace’s Samuel O’Brient recently reported, the company has inked a deal with Shanghai Hydrogen Hongyun Automotive to sell 500 vehicles. If successful, this could pave the way for more orders from this customer as well as other end-users in China. That’s impressive, considering HYZN only opened its doors less than two years ago.
What’s more, this news is only the latest in a series of deals and partnerships that Hyzon has entered so far in 2021. The company has made supply deals in Australia and Europe. It has also announced plans to begin trials of its Class 8 fuel cell electric truck in the United States.
Of course, much of this is already reflected in the price of HYZN stock. At present prices, this name sports a market capitalization of around $2.5 billion. That’s despite projecting just $37 million in sales this year and $198 million in 2022 (Page 40).
However, given how quickly Hyzon started selling vehicles, its prospects of hitting longer-term projections of $3.28 billion in annual sales by 2025 may be strong. Until another major development, this pick of the SPACs may hold steady in price. Still, you may want to buy this one sooner than later.
SPACs to Buy: 23andMe (ME)
Richard Branson-backed VG Acquisition disappointed investors when it decided to make 23andMe its merger target instead of something more out of this world. Many had expected the acquisition target to be Branson’s own Virgin Orbit venture, not this company.
Since February, however, this deal has been announced and closed. During this same timeframe, shares of ME stock have declined from as much as $18.16 per share to around the $8 level today. That’s a more than 50% pullback.
At higher prices, I didn’t think ME stock was very appealing. Post-slide, though, this pick of the SPACs may be worth the risk. The company may best known for its ancestry-testing kits, but now its main focus is monetizing its genetic database in other ways, such as genetics-based health services. ME is also pursuing monetization by collaborating with big pharma names like Glaxosmithkline (NYSE:GSK). The partnership could provide ample upside if it yields new treatments that make it to market.
23andMe may be more of a turnaround story than anything else. However, analysts like Credit Suisse’s Tiago Fauth are bullish. The analyst recently gave shares the equivalent of a buy rating as well as a $13 price target. Fauth cited the value of its main asset, the genetic database. If 23andMe can prove itself, it may be able to move higher from today’s prices.
Microvast (MVST)
Investors have many options when it comes to EV battery plays — particularly ones that went public via SPACs. But among your many choices, MVST stock may be one of the best.
Why? Unlike with other “deSPACed” EV battery stocks like Quantumscape (NYSE:QS) — which is still trying to get its technology off the ground — MVST has already reached the commercialization stage. Plus, the company’s focus on the commercial EV market rather than passenger EVs may mean it faces less competition. Microvast has even already partnered with leading commercial vehicle maker Oshkosh (NYSE:OSK). Basically, the path to success is a lot more clear here than it is with other competitors.
Sure, MVST stock’s $3 billion market capitalization may already take these prospects into account. But as one Seeking Alpha commentator wrote last month, the company’s battery cell technology has other potential applications as well. So, an eventual move into other areas — like passenger EVs, electronics and energy storage — could help this stock reach price levels last seen during the height of SPAC mania. Now may be the prime time to enter a position.
SPACs to Buy: TPG Pace Beneficial Finance (TPGY)
Last up on this list of SPACs and “deSPACed” stocks is TPGY, another potential play on the EV industry.
As you may know, TPG has a pending deal to merge with EVBox, a Europe-based charging infrastructure provider. However, there has been a lot of uncertainty surrounding the agreement. The close of the transaction has been delayed. Now, investors have pushed it down to prices just above $10 on concerns that the transaction won’t go through.
This may sound a bit like the Ackman-PSTH situation. And sure, the blank-check company could end up redeeming all outstanding shares of TPGY stock. Nevertheless, this stock may still be an opportunity that’s worth the risk.
If the deal doesn’t go through, the downside is fairly limited. Buy in today and worst case scenario you’ll get $10 per share back. But if the deal ends up happening? You’ll own a piece of what could be one of the more promising EV charging plays out there. Already a leading European provider by market share, EVBox may be able to parlay its past success into the U.S. market. After all, the billions earmarked for EV charging in the upcoming infrastructure bill point to plenty of opportunity stateside.
The deal to merge with EVBox may still be up in the air. Yet, with upside potential outweighing downside risk, this pick is still worth buying today.
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On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.