Are These The Best SPAC Stocks To Buy Before January 2021?
2020 is undoubtedly a banner year for SPAC stocks in the stock market. You see, SPACs are clearly getting more mainstream. After all, many companies want to take a shorter and less expensive pathway to go public. Not to mention, less hassle. By now, I assume you may be familiar with SPACs. Perhaps you have come across or invested in a company that went public through this route. If you would like to know more about this financial vehicle before you head off to the holiday, read on.
What Is A SPAC & Why Should You Consider Them?
A special purpose acquisition company (SPAC) is a company with no commercial operations. It is structured strictly to raise funds through an initial public offering (IPO). Some also refer to them as blank cheque companies. With the capital raised, a SPAC then identifies a private company to merge with. This essentially provides a faster way for a private company to go public, without the traditional, more lengthy IPO process. The truth is, SPACs have been around for a few decades now. A possible reason they are getting popular again this year could be to do with the electric vehicle (EV) revolution we are experiencing in the stock market today.
If you have only gotten to know SPACs recently, chances are the ones that you know are in the EV space. And if you are new to the stock market, there’s a great chance you’ve heard of QuantumScape’s (QS Stock Report) monstrous rally in the past few weeks. Make no mistake, not all SPAC stocks could generate this magnitude of return in such a short period of time. While many SPACs have brought good returns to shareholders in recent months, we don’t know if the music can go on forever. Nevertheless, investors should take note that not all SPACs are created equal. There’s a chance you could burn your investment without proper research and due diligence. With that in mind, let’s take a closer look at trending SPAC stocks in the stock market today.
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Trending SPAC Stocks #1: XL Fleet
First up, shares of XL Fleet (XL Stock Report) jumped 86.2% on Wednesday during the company’s second day of trading. The surge came after the company completed its merger with SPAC Pivotal Investment Corporation II. Of course, like with many other EV stocks in the market, the spike in XL stock may have caught many off guard. Apart from being a new SPAC in the stock market, there wasn’t any specific news that could trigger such a return. So, apart from the hype, what’s so special about this EV player? And how has it garnered so much interest from investors? Here’s why.
Unlike many of the EV stocks out there, XL Fleet is less interested in making electric vehicles from the ground up. Rather, the company retrofits existing commercial vehicles into hybrid and plug-in hybrid vehicles. That is good news for owners of commercial vehicles, who can make their vehicles greener without spending on a new EV. “As the leader in commercial fleet electrification, XL Fleet turns many of the most popular class 2-6 vehicles from Ford, Chevrolet, GMC, and Isuzu into hybrid and plug-in hybrid electric vehicles, without disrupting their performance,” the company website reads. “We make them cleaner and more fuel-efficient while leaving the OEM powertrain (engine, transmission, fuel and exhaust systems) completely intact. It’s a simple way to improve vehicle MPG and meet sustainability goals without compromising your operations.”
Investors love XL stock because it already is in business, as opposed to some companies still in concept and development phases. XL Fleet expects to achieve sales of $21 million this year, nearly triple what it did in 2019. Besides, the company has a sales pipeline of over $220 million, according to its investor presentation. With such growth potential ahead, would you be adding XL stock to your watchlist?
Trending SPAC Stocks #2 Foley Trasimene Acquisition II
Next up, Foley Trasimene Acquisition II (BFT Stock Report) is another trending SPAC stock in the market. The company aims to dominate the U.S. gaming market with payment solutions Skrill and Neteller (formerly known as Moneybookers) through the acquisition of Paysafe Group. You could say it’s offering a similar service to PayPal (PYPL Stock Report). The difference? PayPal offers users the ability to trade cryptocurrencies, while Paysafe allows its users to engage in online gambling.
These online wallets could be a great value for the company. You see, when you go to a physical casino, the first thing you probably want to do is to get your chips straight to the table, right? You wouldn’t want to queue up to get the credit for the game. The same thing applies here. Banks and credit card providers could be very time consuming, not to mention that they can charge a high fee if you want to engage in online gambling.
The real play here is U.S. gaming. With online gambling increasingly getting legalized, there could be a big opportunity here. These online wallets are fairly convenient if you like online gaming. It’s impressive how Paysafe could operate efficiently in various jurisdictions. What’s more, Paysafe counts notable private equity firms Blackstone Group and CVC Capital Partners among its shareholders. With all these in mind, is BFT stock the best bet on the rise in online gambling?
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Trending SPAC Stocks #3 Colonnade Acquisition
Last on the list, Colonnade Acquisition (CLA Stock Report) has been making big moves in the stock market this week. The excitement came after the news that Colonnade will be merging with Outster, a maker of lidar sensors for autonomous driving and smart cities, to name a few. The newly combined company will have an enterprise value of about $1.6 billion and will give Ouster $300 million in gross proceeds.
Recall that Velodyne Lidar (VLDR Stock Report) and Luminar Technologies (LAZR Stock Report) were skyrocketing after mergers with SPACs. Therefore, it is understandable that investors are cheering the announcement of the Colonnade-Outster merger. Investors are no doubt hoping that CLA stock would replicate the success of both Velodyne and Luminar.
Unlike the other lidar companies which primarily focus on the automotive industry, Ouster’s systems have broad applications. These cover the industrial, smart infrastructure, robotics, and automotive markets. Ouster believes the total addressable market across these four markets will be worth $9 billion in 2025, rising to $50 billion by 2030. In addition, the company claims that its digital lidar technology is cheaper and has better performance than analog systems. Considering the flexibility of Ouster’s platform, would you be keen to have CLA stock in your portfolio?