Fisker Opts for SPAC as Route to Take Electric Vehicle Maker Public

Earlier this week, Fisker Inc., a pioneer in developing electric vehicles, announced it would become a publicly traded company by merging with Special Purpose Acquisition Company (SPAC) Spartan Energy Acquisition Corp. (NYSE: SPAQ). As rumors of the potential merger grew, shares of Spartan Energy have become a hot commodity for investors, jumping more than 40% in the days leading up to the official announcement before settling back a bit by week's end (but still up 37% for the year).


Historically, an initial public offering (IPO) has been the common route for a company seeking to issue stock to be traded on the open market. However, IPOs can be an exhaustive process for companies to execute and have recently waned in popularity.

Electric SUV plugged into a power station

Image source: Getty Images.

Fisker is going public through an alternative method, which involves a special purpose acquisition company. A SPAC is a shell company that has no business operations and raises money via an IPO in order to acquire a privately held company and effectively take it public through the merger. SPACs have been rising in popularity because selling companies have found them quicker and easier to use compared to a traditional IPO.

Spartan Energy Acquisition Corp. was designed to focus on energy value-chain companies. The deal to acquire Fisker values the company at $2.9 billion and will allow Henrik Fisker to remain at the helm as CEO. The deal is expected to close in the fourth quarter of 2020. Once the deal is complete, Fisker will be listed on the New York Stock Exchange.

Getting production up and running

With all the new electronic vehicle (EVs) companies in the market today, a newly public company may find it difficult to distinguish itself from the rest of the pack. Fisker is shaking up the automotive industry by developing what it refers to as the eco-friendliest EV on Earth. In the past, Fisker has developed two cars, the Fisker Karma beginning in 2011 and, beginning in 2018, the Fisker Emotion. The company plans to use roughly $1 billion raised from the IPO to put its Fisker Ocean SUV into production.

Production on the Fisker Ocean model should begin in late 2022. The SUV won several awards when it debuted as a concept vehicle at the 2020 Consumer Electronics Show. The awards made note of the car's elegant design and its sustainability features. The SUV is said to have a 250- to 300-mile all-electric range and will use all recycled materials.

The company is targeting a price range of $37,000 to $69,000 for its new line of SUVs. That would favorably position it against more expensive offerings from companies like Volvo and Rivian, which have their own electric SUVs planned.

Bridging the gap with partnerships

A key element to Fisker's go-to-market strategy is a collection of partnerships with established manufacturers and service providers.

First, Fisker has a manufacturing partnership with Volkswagen where Fisker will leverage VW's modular electric drive matrix to serve as its electric battery drivetrain. By partnering with VW, Fisker will be able to go to market in half the time with substantially lower costs.

Second, the company is partnering with Electrify America for access to its charging stations. Electrify America is investing $2 billion through 2027 to build out a nationwide electric charging network. This makes Fisker's charging capabilities competitive with Tesla.

Finally, Fisker is partnering with Cox Automotive for local storage and maintenance services. Cox Automotive has 78 service locations in the U.S. and 108 global locations which will be authorized as full-service maintenance hubs for Fisker drivers.

By partnering with several established industry peers, the company can focus on designing and producing electric vehicles.

Electric vehicles becoming the new appeal for investors

Fisker will become the latest in a growing list of publicly traded electric vehicle companies. Recently, Tesla has been a great success story for its investors, having more than doubled its share price this year alone. Companies such as Hyliion (to be acquired by Tortoise Acquisition Corp. in another SPAC transaction) and Nikola have also recently become public with the hopes of following in Tesla's footsteps.

The electric vehicle market is still a fairly untapped opportunity full of potential, so it makes sense that more and more companies such as Fisker are raising capital to increase production. Clearly, investors are also happy to go along for the ride.

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Luis Sanchez CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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