TPG Pace Will Keep Climbing Ahead of Its Blockbuster Merger
TPG Pace Beneficial Finance (NYSE:TPGY) stock is down 21% in the last month, giving investors the perfect opportunity to snap it up before its eventual merger with EVBox Group, a global provider of smart-charging solutions for electric vehicles (EVs).
This “blank check company” ticks off all the boxes and then some. TPG Pace is backed by global investment firm TPG, which has over $91 billion of assets under management.
Launched in October, the SPAC found a target very quickly, and the markets loved the decision. The merger values EVBox at an implied enterprise value of about $900 million. When the merger closes, the company will have $425 million of cash that it can use to expand its operations.
Amidst a sea of SPAC investments, TPGY stock stands out because it has more things going for it than against it. As a result, the shares are worth buying.
TPGY Stock Is Trading at an Attractive Valuation
For many stock pundits, 2020 was the year of the SPAC. While SPACs have been around for about 20 years, investors began really falling in love with them last year. Many companies that did not want to go through the grind of traditional IPOs used SPACs to go public.
Before firms launch IPOs, they are required to provide audited financial statements. In contrast, those who examine SPACs put more weight on forecasted future financial data.
It’s important to note that investors can get burned quite badly by SPACs. As an example, Nikola (NASDAQ:NKLA), a start-up looking to develop long-haul semi-trucks powered by hydrogen and electricity, came under fire when short-seller Hindenburg Research alleged that the company is “an intricate fraud.” Understandably, Nikola’s stock price tanked and has not fully recovered.
EVBox is projecting 2021 revenue of over 120 million euros. In subsequent years, the company will continue to do well, considering the massive interest among investors in the EV sector. Its Everon EV charging app, which allows users to find and pay for nearby charging stations, should boost its margins over the long-term. It plans to eventually launch additional mobile apps.
I am not saying that TPGY stock is cheap. However, considering its shares are down about 40% from their 52-week high, it’s reached an attractive level.
Buy This Promising Play on the EV Space
EVBox has high growth potential. The company has set its sights on the North American market as it continues to enhance its products. Non-cyclical trends will continue to help the company grow exponentially moving forward, and its business model will accelerate its margin growth.
But EVBox still poses substantial risks. Valuations in the EV space do not reflect fundamentals. Due to the rise of Tesla (NASDAQ:TSLA), investors are consistently looking for the next multi-bagger in the space.
But Tesla isn’t exactly trading at a reasonable valuation. Plus, it will take time for countries around the world to spend hundreds of billions of dollars on EV infrastructure. Meanwhile, many countries are still struggling economically. As a result, profitability is not exactly around the corner for EV startups.
Nevertheless, if you can stomach a bit of risk, you can go ahead and initiate a small position in TPGY stock to take advantage of its short-term catalysts. But EVBox has enough of a long-term story to keep me interested in the name after its merger, and that’s a rare quality in the SPAC world.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence.