GIK Stock: 12 Things to Know Ahead of the Lightning eMotors SPAC Merger
To start, the key part of the story is that GigCapital3 will soon be taking Lightning eMotors public via a reverse merger. Because Lightning eMotors has a role in the battery and electric vehicle market, GIK stock already looks hot.
With that in mind, here are 12 things to know about GIK stock and the Lightning eMotors SPAC merger:
* GigCapital3 first came public in May 2020 and started trading on the New York Stock Exchange.
* At the time, the company raised $200 million by selling 20 million units at $10 each.
* Cohen & Company, the anchor investor, contributed $17 million of the deal.
* Initially, GigCapital3 said it wanted to focus on technology, media and telecommunications businesses.
* Now, GigCapital3 says it will take Lightning eMotors public.
* This is because Lightning eMotors has proprietary vehicle control software, mobile charging solutions and other software integrations for EVs.
* Lightning says it is the only manufacturer that has a full line of battery and fuel cell zero-emission commercial vehicles on the road.
*It serves a total addressable market of $67 billion.
* Importantly, its customers include Fluid Trucks, ABC Companies, ACE Parking and California State Hospitals.
* Lightning eMotors will reach production of 20,000 medium-duty EVs by 2025.
* Additionally, the company will reach revenue of $63 million in 2021 and predicts $354 million in revenue for 2022.
* The pro forma implied equity value of the merger is $823 million.
There is, of course, the broad trend we have seen in special purpose acquisition companies in recent weeks. The market has a huge appetite for new offerings, and SPAC deals and initial public offerings have largely flourished. Additionally, we know that the EV and battery markets are particularly hot.
Specifically though, there is reason to find appeal in GIK stock and the Lightning eMotors SPAC merger. Right now, Lightning eMotors stands out because its vehicles are already in production. In fact, the company says it has the largest zero-emission fleet vehicle manufacturing facility in the U.S. It can produce 1,000 vehicles today, and plans to scale to 20,000 by 2025. For 2021, that figure should be closer to 3,000.
Additionally, Lightning eMotors currently has a backlog for 2021 and 2022 of 1,500 vehicles. Although this figure may not be huge, it gives Lightning an edge against still-in-development peers.
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Lightning eMotors: The Best EV Company You've Never Heard Of
EVs are expected to grow substantially due to government mandates and the cost benefits of EVs, which should only be fueled further by the new administration.
Lightning provides a full suite of solutions for the Class 3-7 market and is the only company providing an electric powertrain solution currently.
The company is substantially differentiated from the competition due to regulatory approval, big partnerships, a commercially proven product, and a large order pipeline.
Despite this, it trades at fairly low valuations compared to inferior companies like XL Fleet and Hyliion.
With all the EV SPACs coming public today, it's hard to tell which companies are good and which are dangerously overhyped, so it's not a surprise that many gems seem to have slipped through the cracks. Lightning eMotors (GIK) is one of these gems in my opinion as it not only has an attractive suite of offerings with substantial differentiation from the competition but it has maintained a relatively low valuation despite the EV SPAC craze.
About Lightning eMotors
I first learned about Lightning when I was doing research on a battery EV SPAC called Romeo Power (RMO). Romeo Power's 2nd largest customer was Lightning, with over $60mil in battery orders.
I did not know anything about Lightning at that time, so I decided to take a look at their website, and what I found seriously impressed me. They had investments from BP Ventures and were fitting Ford trucks with their EV technology.
Fast forward to today - Lightning announced in Dec 2020 that it was going public through a reverse merger with GigCapital3 that is expected to close in the first half of 2021. While it did get a 20-30% initial merger pop, the company hasn't moved much afterwards and currently trades only 60% above the initial $10 SPAC offering price.
Lightning is an EV company that offers a fully integrated suite of EV solutions, including manufacturing and selling EVs, conversion of gasoline vehicles to electric, fleet analytics, and even includes charging solutions and financing services.
The company mainly focuses on the $67bil Class 3-7 truck market, which consists of everything from ambulances, shuttle buses, bucket trucks, and even motorcoaches. This allows it to avoid the substantial price competition from large OEMs in both the light-duty and the heavy-duty market.
Lightning has differentiated its product in this space by designing modular software and hardware architecture, allowing it to provide customized yet cheap vehicles to this highly segmented market.
Unique position in a fast growing industry
I'm sure everyone reading knows by now the basic facts about the EV market, but just in case you don't, let me recap.
Electric vehicles are expected to hit an inflection point in the next few years, driven by both a concern about climate change and the cost benefits electric vehicles have over traditional internal combustion engines. Several states, like California have already mandated automakers to reduce the sales of ICE vehicles. In the bus and MCV market, which Lightning operates in, EV sales are expected to grow 4.9x over the next 20 years.
Lightning has over 50% of the electric Class 3-7 commercial vehicle market, selling 3x more than its next largest competitor. Competitors by the way include pretty big companies like Greenpower Motors, so this definitely isn't as easy as it sounds.
Lightning's solution is backed by 10 years of R&D and 2 years of customer validation, and so far over 120 of its vehicles are on roads today. Since fleet customers are very risk-averse customers that want a proven product, Lightning's reliable and on-the-road products differentiate it substantially vs other unproven companies. In addition, it is the only player certified by CARB allowing it to sell in California and 15 other states.
Currently, a test of Lightning's vehicles vs ICE vehicles by ACE parking shows an 80% decline in fuel and maintenance costs every month. However, this assumes a purchase of the 2 different vehicles. In a leasing scenario, Lightning's vehicles are more expensive than gasoline, but when subsidies are considered, they become 50% cheaper per month. Interestingly, as manufacturing scales up, Lightning believes its cost of production would allow it to be $500 cheaper compared to gasoline vehicles even without subsidies.
Besides its main electrification solutions, Lightning also has a very differentiated analytics solution with 100% attach rate and provides high margin recurring revenue every month. The analytics helps to improve vehicle operations 25-30% better than competitor solutions as due to Lightning's collection of over 260mil data points per vehicle per day and its deep knowledge of everything regarding its products.
Lastly, for such a small company, Lightning has some very impressive partnerships with big players. For example, it has a partnership with Plug Power (PLUG), a multibillion-dollar fuel cell company in the US, to offer the world’s first electric, fuel cell-powered Class 6 trucks for middle-mile delivery. In addition, it has partnerships with ABC company, a leading motorcoach services company with customers like Facebook and Google, to convert their ICE vans to electric, which includes a $48mil purchase order. This order was recently expanded by $45mil which really demonstrates the superiority of Lightning's products
Lightning believes its revenue can grow substantially over the next few years from $9mil in 2020 to $2bil in 2025. A substantial amount of Lightning's projected revenue is backed by its pipeline. As you can see above the prospect pipeline has grown substantially over the past few months from 1000 in Jan to over 6000 in September, and the current order book of 1500 vehicles creates a $150mil backlog that more than covers the whole of 2021.
Lightning is showing 11 customers (in different colors) that have over 450k vehicles in their fleet. Lightning's projection assuming that these 11 customers alone will steadily ramp up purchase orders to 20-25k units by 2025, which does not include Lightning's other customers or potential international demand.
As manufacturing ramps up, efficiency is expected to increase substantially and gross margins are expected to ramp from 2.9% today to over 26% in 2025, which will generate accelerating gross profit growth. Lightning has changed its manufacturing process 2 times over the last 3 years to lower costs and further changes could lower costs even further.
Declines in R&D, S&M, and G&A are expected to lead to an inflection in EBITDA sometime in 2022 with strong EBITDA and FCF growth thereafter.
Last of all, the merged company is expected to have over $170mil in cash on the balance sheet, which is far more than required for operations and should help Lightning to accelerate growth drastically over the next few years.
GIK currently trades at just 1x 2024E revenue compared to 1.8x for closest peer XL Fleet (XL). It trades at a similar valuation to Hyliion (HYLN) but has it actually has an $800mil pipeline that substantially de-risks management's projections unlike the former company.
Due to the large pipeline, I believe this investment is substantially derisked compared to other EV companies, but there is always a risk that competitor products could arrive earlier than expected and derail Lightning's commercial success. For example, if XL Fleet develops its ZEV solution earlier than expected and it turns out to be vastly superior to Lightning's solution, customers may switch to XL Fleet.
Overall, I think GIK is one of the highest quality EV SPACs you can buy today. With a commercially launched product, a robust pipeline worth over $800mil, and a very conservative valuation, I think GIK can outperform in the next few years as EVs continue to gain popularity.
https://seekingalpha.com/article/439953 ... r-heard-of
The SPAC boom continues. GigCapital3 (NYSE:GIK) is seeing shares move higher ahead of its announced move to bring Lightning eMotors public. This SPAC merger is highly anticipated. While a date is not yet announced, recent tweets have reignited interest in GIK stock. Currently, this stock is up more than 17%.
GIK Stock Moving on Tweets
Social media has changed the investing game, forever it seems. Indeed, a single tweet has moved GIK stock significantly higher today.
https://twitter.com/LightningeMtrs/stat ... de%3Dfalse
This tweet, from Lightning eMotors’ Twitter (NYSE:TWTR) feed, shows a photo of an Amazon (NASDAQ:AMZN) delivery van with “100% electric” on the side panel. This has stoked speculative investment in this stock, as investors are gauging the scale of Lightning eMotors’ market as defined by its existing clientele and future potential partnerships. We do not know much about this photo though. We do know that Amazon is a customer of Lightning eMotors. However, a more formal Amazon partnership could be a catalyst that would take this stock higher.
Another tweet earlier last month regarding Lightning eMotors’ USPS partnership has perpetuated this conversation. Investors seem to be guessing right now as to the full extent of Lightning’s medium- to long-term business prospects. Thus, the speculative nature of this stock makes it an intriguing, and potentially volatile, trade today.