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[JohnCM]

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Spartan Energy Acquisition (SPAQ)

On July 13 Spartan Energy Acquisition agreed to merge with Fisker. Fisker will make an electric SUV in 2022. According to Barron’s, Fisker expects to make 225,000 electric SUVs a year by 2025.

The reverse merger transaction is at a $2.9 billion enterprise valuation, assuming a $10 price for SPAQ stock. However, the stock has now risen to $12.36, so the new EV is almost 24% higher at $3.6 billion.

By the way, this $2.9 billion valuation number is on the press release. But a related slide presentation says the deal is at pro-forma value of $1.9 billion. So it is not clear which one applies. If the $1.9 billion EV number applies, the present valuation is almost 24% higher at $2.35 billion.

The deal will provide $1 billion to Fisker. The slide presentation implies it is very cheap. For example, the $1.9 EV valuation implies just 0.6 times 2023 estimated sales of $3.3 billion. It also implies just 4.3 times adjusted EBITDA of $441 million in 2023.

Therefore, since SPAQ stock has risen, the new EV-sales ratio is 0.76 times. That assumes a $1.9 billion valuation at the transaction. But if we assume a $2.9 valuation, after the recent stock price increase the ratio is 1.2 times. The same applies to the EV-EBITDA ratios. It is now either 5.6 times or 8.37 times.

The stock could easily double or triple by 2023, possibly much more than that. Again, Tesla stock trades for over 10.8 times historical sales.