4 SPACs to Watch in 2022
The Rundown - Your weekly SPAC Deep Dive (12/19/21)
Happy Sunday Friends!
As the year comes to a close, let’s take a look at De-SPACs that have the potential to shake up the industries that they currently operate in. With the broader market selloff, a majority of these companies are now trading close to or below their fair value, presenting investors with an opportunity to get in at a significant discount. In today’s rundown, we cover companies ranging from an EV Charging Station Maker to a company building out digital twins in the Metaverse. Read on to find the SPACs to look forward to over the next year.
ChargePoint: Leading the EV Revolution
Current Stock Price: $19.03, Returns from De-SPAC: -33.25%
Most EV makers who went public this year through SPACs overpromised and underdelivered. EV Charging station provider ChargePoint, which has seen several tailwinds in the last few quarters, has raised guidance not once, but twice compared to its original SPAC guidance. While management initially indicated that revenues for the year would be around $198 million, the company is now on track to generate over $240 million by the end of the year. With the acquisitions of ViriCiti and Has-To-Be, ChargePoint has bolstered its charging network across Europe and is currently the North American Market Leader with a 70% market share in the EV Charging infrastructure (the company had 163,000 ports including 11,000 DC ports across Europe and NA at the end of Q3).
Furthermore, several macro tailwinds including the $7.5 billion allocated from the Infrastructure bill and the executive order from Joe Biden that 50% of all vehicles sold need to be electric by 2030 will play a key part in driving growth. Despite ChargePoint Stock seeing a 60% correction from its all-time high’s earlier in the year (as investors were concerned with losses widening), the company is still trading at a premium compared to its peers at an Forward Sales Multiple of 27x compared to 4.5x for Volta and 15x for EVgo, reflecting its market leadership position. ChargePoint has not only demonstrated that it can maintain its leadership position in the face of strong competition but can also grow rapidly (60%+ revenue growth), making the stock an interesting one to watch next year.
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Genius Sports: A Monopoly in Sports Data
Current Stock Price: $7.47, Returns from De-SPAC: -4.53%
Genius Sports has been through a roller coaster ride for much of the year. While the company was widely regarded as a successful de-SPAC for most of the year, the stock saw a sharp selloff in November (shares are down 61% since Q3) along with other gaming stocks like DraftKings. Genius has a monopoly in data to many sports leagues including the NFL, NCAA, PGA and Premier League with a total addressable market of $1.5 billion and provides access to operators including DraftKings, FanDuel, William Hill, SkyBet, Betfair, Bet365 and Paddy Power.
The company’s scale and existing long term relationships with both leagues and betting operators prevent new companies from entering the market while generating substantial recurring revenue (70% of revenues are recurring) over the long term. At its peak, Genius was trading at close to a $5 billion valuation as investor enthusiasm for the legalisation of gambling drove the stock up to record highs (ATH of $25.18). Since then the stock has suffered as investors question the long-term profitability of the business as a result of the massive investments required to secure the long term partnerships. Despite the scepticism around the long-term viability of Genius’ business model, the company remains a solid bet on the industry as a whole.
Matterport: Building Out Digital Twins in the Metaverse
Current Stock Price: $22.79, Returns from De-SPAC: 57.5%
As the Metaverse takes shape, the company is positioned to play a major role in the development, given its strategic partnerships with both Facebook and Amazon. Just as Google transformed businesses & physical spaces into digital maps and locations services, Matterport aims to digitise physical spaces into the Metaverse. As Matterport continues to transform buildings into data worldwide, it will eventually turn into a digital database for physical spaces. Management believes that the addressable opportunity is huge with just 1% of the 20 billion spaces in the world currently digitalised. Matterport’s platform enables owners, underwriters and occupants to manage the lifecycle of a building.
In addition, customers in architecture, insurance & design will massively benefit from Matterport’s tech, with the addressable market being estimated at $100 billion. Despite the enthusiasm around the metaverse and the implications on society itself, Matterport is currently trading at a significant valuation premium. While the company currently trades at a market cap of $5.52 billion, management expects to only generate $108 million this year. Even if management believes that it can achieve its ambitious revenue targets, it is still trading at an FY23 Multiple of 11.75x. Matterport is a long-term winner and an integral cog powering the metaverse but is too expensive at current levels, so investors should wait for a correction before entering the stock.
Nextdoor: Welcome to the Neighbourhood
Current Stock Price: $8.01, Returns from De-SPAC: -40.66%
Investors Appetite for SPAC transactions has waned in recent months, but despite a weaker sentiment for deals, Nextdoor Closed its SPAC transaction in November to much fanfare (only 7% of shareholders decided to redeem shares & the company raised $674 million) from institutional and retail investors alike. There are plenty of reasons to be optimistic about NextDoor, with a 33 million-strong audience that has a 54% engagement rate after two years. Furthermore, the company’s platform has seen strong network effects with a 2.3x increase in weekly engagement as more neighbours join, and nearly 1 in 3 US households now using the Nextdoor app.
Users on Nextdoor find distinct value compared to other social media platforms as they build real-world relationships, receive trusted information & give and get things done (43% of Nextdoor Users don’t use Instagram, 27% aren’t active on Facebook & Messenger). The strong engagement in the user base is also translating to strong revenues, with favourable unit economics (ARPU grew 38% to $1.61 in Q3) and growth exceeding 50% YoY. Critics have been quick to point that Nextdoor is trading at a significant premium (31x P/S on day of listing), and since then shares have promptly seen a correction. Given that there is a huge gap in the local web and discussions market which Nextoor aims to address, it’ll be great to see how the company can create value moving forward.