Fisker, an EV manufacturer that will join Spartan Energy (NYSE:SPAQ) as part of reverse merger that could be days away is getting in on a trend, that has made SPAQ stock unpredictable.
Electric vehicles! Electric vehicles! The temptation among investors these days is to leap at anything that has a battery, four wheels and seats four. And wouldn’t it be dandy if Ma and Pa Investor, Bro and Sis Investor, and even Rover the Investor Wonder Dog could drive via Wall Street to Easy Street courtesy thereof?
The only problem is this: If the Investor Family hopes to pull into said Easy Street in a Fisker Ocean SUV, they can line up, take a number and read all 1,545 pages of The Lord of the Rings trilogy and The Hobbit.
Plus, they’d have plenty of time left over to build their own EV, assuming Fisker or Ikea supplies the kit.
Therein lies the danger with the EV sector: It’s hard for even savvy investors to tell which wannabe electric emperors lack electric clothes. Let’s be fair and point out that Fisker has somewhat jumped off the drawing board. But the question is how far, thus proving the company is more than just electrified hype.
SPAQ Stock Is an EV Rollercoaster
If you bought SPAQ stock at the start of September, you’re barely better off today. Other than a 3% jump—the stock trades at just about $14 per share—you only have a case of the queasies to show for your dough.
Sept. 1 to Sept. 18: up 24%! Sept. 18 to Sept. 24: down 23%! Since then: up close to 8%. If past performance is any indicator, have a bottle of Pepto-Bismol handy.
Yes, there was good news, sort of, on Oct. 15: Fisker announced that it had struck a deal with auto supplier Magna International to build the Ocean SUV. But along with your fancy seat warmers and such, be sure to order a grain of salt. Fact is that this deal involves equity, as Magna will receive warrants to purchase up to 6% in Fisker, worth about $3 billion.
“We’re full speed ahead,” Fisker Chief Executive Henrik Fisker crowed in an interview with CNBC. “This is a huge turning point.”
Ah, but turning point into what? Fisker said this proves Magna has “skin in the game,” but I counter that it’s equally true that Fisker can’t afford to make his vehicles and thus had to give up a nice chunk of his namesake company to do it. You be the judge.
Here’s the Sales Pitch
Fisker, like Elon Musk of Tesla (NASDAQ:TSLA), believes so firmly in his vision that he’ll do all he can to inspire confidence in it. That’s admirable when you file his motivation under “man of vision,” especially since the Fisker Ocean equals a vote for environmental sustainability.
Granted, SPAQ stock is not officially an investment in Fisker proper, but the whole purpose of Spartan Energy is to make it so. But here’s the rub: You have to make a bit like a used car salesman once your company goes public. What does this mean, in practical terms?
To begin with, supercharged superlatives. Fisker refers to its Ocean not merely as a sporty SUV but one that “will be the world’s most sustainable vehicle.” The trappings will include vegan leather and carpeting made from repurposed abandoned fishing nets. Let’s not speculate what this means if you spill your beefy Big Mac all over the seats.
No Time for an SPAQ Play
Now, notice how Fisker says “will be.” That’s the phrase I’d focus on, rather than “world’s most.” Call me a market fussbudget and grammar stickler, but “will be” is not “is.” And that is what it is.
So once again let’s put you in the driver’s seat to consider another fact. SPAQ stock is riding, in part, on the happy news that Fisker has recorded more than 33,500 registrations on its custom-made app as of last month. But are those confirmed sales? Even one of them? Unfortunately, 33,500 registrants on an app may in the end equate to 33,410 window shoppers.
Better yet, ask any salesperson worth her salt whether a potential sale is a confirmed sale. Better yet, ask a used car salesman. As for SPAQ stock, call it a speculative bet in a nascent sector on an unproven company that has just given away a chunk of its ownership just to get its dang SUV built.
Or, call it what you like. Just make sure that until a fistful of Fisker Oceans roll off the assembly line, the Investor family is thumbing a ride in a Tesla.
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.