SPACs (Special Purpose Acquisition Companies), also known as “blank check companies,” are companies with no commercial operations. They are formed to raise capital through an IPO (Initial Public Offering) with the purpose of acquiring existing companies.
As of July 9th, 2020, there were 39 SPAC IPOs that raised gross proceeds of $12.3 billion, nearly eclipsing all SPAC gross proceeds raised in the full year 2019.
A particular SPAC that got a lot of attention this year was launched by famed Hedge Fund Portfolio Manager Bill Ackman, named Pershing Square Tontine Holdings. Ackman’s hope is to buy a unicorn startup with the funds.
DraftKings Inc. (DKNG), Nikola Corp. (NKLA), Virgin Galactic Holdings Inc. (SPCE), and Repay Holdings Corp. (RPAY) are four SPACs that investors should keep on their radar for the remainder of 2020 and beyond.
DraftKings Inc. (DKNG)
DKNG is a digital sports entertainment and gaming company headquartered in Boston. In April 2020, DKNG became a public company when it completed a $3.3 billion merger with SPAC Diamond Eagle Acquisition Corp. The stock has gained more than 165% since its March lows.
DKNG along with the Brook and the New Hampshire Lottery recently announced the opening of the new DraftKings Sportsbook at The Brook which will give sports fans the chance to place legal bets on all major professional and collegiate U.S. sports at a retail location.
DKNG announced a multi-year extension with Major League Baseball to remain the official and exclusive Daily Fantasy Sports (DFS) Partner of the League. Furthermore, the company also announced expansion of their multi-year content and marketing relationship with the PGA Tour which makes DKNG the first official betting operator of PGA Tour.
In the second quarter, DKNG’s GAAP revenue increased 24.6% year-over-year and the company ended the quarter with over $1.2 billion in cash and no debt on its balance sheet. DKNG’s EPS is expected to grow 40% per annum in the next five years.
How does DKNG stack up for the POWR Ratings?
A for Trade Grade
A for Peer Grade
B for Buy & Hold Grade
B for Overall POWR Rating
The stock is also ranked #3 out of 22 stocks in the Entertainment-Casinos/Gambling industry.
Nikola Corp. (NKLA)
NKLA designs and manufactures zero-emission battery-electric and hydrogen-electric vehicles, electric vehicle drivetrains, vehicle components, energy storage systems, and hydrogen station infrastructure.
After NKLA merged with VectorIQ Acquisition Corporation, the company went public in June this year. The stock jumped in the beginning of June and since then has remained volatile.
NKLA announced a minimum order of 2,500 electrified refuse trucks from Republic Services (RSG), expandable up to 5,000 which is the largest order in the waste industry. Full production deliveries are to begin in 2023 with on-road testing likely to start in early 2022. The refuse trucks are anticipated to carry up to an industry-leading 720kWh of energy storage.
It looks like NKLA is trying to traverse a similar path as Elon Musk’s Tesla (TSLA) with the positive future prospect of electric vehicles.
NKLA is set to bring the 1 million square foot future multi-product factory 4.0 manufacturing facility to Coolidge which will use the latest technology to enhance 24/7 connectivity in the building as well as equipment to optimize quality and overall energy.
NKLA has an average analyst price target of $55 which represents a potential upside of 42.2% and two out of four Wall Street analysts have a ‘Strong Buy’ rating on the stock.
Virgin Galactic Holdings Inc. (SPCE)
The vertically integrated aerospace and space travel company has grown more than 60% since its March lows. SPCE has an analyst average price target of $25.75 which represents a potential upside of 46.1%. SPCE’s shares started trading on the NYSE in October 2019 after SPCE closed a merger with Social Capital Hedosophia.
George Whitesides, Chief Space Officer of SPCE said, “During the second quarter we continued to advance our test flight program, including conducting two successful glide flights from Spaceport America. We saw continued growth in customer demand, with increases in paid enrollments for our ‘One Small Step’ program, and entered into deposit agreements for orbital space flights with twelve customers.”
He further said, “Going forward, I am excited to focus my efforts and expertise on important future business areas, including high speed travel, in my new role as Chief Space Officer. We believe that these new technologies represent the future of aviation and we look forward to working with respected parties like NASA, Boeing and Rolls Royce to explore how we can revolutionize the way we travel.”
SPCE expects to advance to the next phase of its test flight program with its first powered spaceflight from Spaceport America this fall, with two test pilots in the cockpit followed by a second powered space flight with the addition of four mission specialists in the cabin.
The company announced the first stage design scope for its high-speed aircraft design as well as signing of a MOU with Rolls-Royce for collaboration to develop the aircraft’s engine propulsion technology. Three out of four Wall Street analysts have a ‘Strong Buy’ rating on the stock.
Repay Holdings Corp. (RPAY)
The provider of vertically-integrated payment solutions has grown more than 100% since its March lows. RPAY merged with Thunder Bridge Acquisition in July last year.
RPAY announced a technological integration with Sage 500 in order to help merchants with B2B Transactions through APS Payment Platform.
RPAY also announced the acquisition of cPayPlus, an accounts payable automation provider for up to $16 million out of which $8 million was paid at closing. This will boost RPAY’s AP automation offering and help the company capitalize on the current digital trend
In the second quarter, RPAY’s total revenue increased 68% and card payment volume increased 63% year-over-year. Furthermore, the company’s net income was up 27% and gross profit increased 63% over the second quarter of the previous year.
RPAY’s POWR Ratings reflect this promising outlook. It has an overall rating of “Buy” with an “A” for Trade Grade and a “B” for Buy & Hold Grade, Peer Grade and Industry Rank. Among the 163 stocks in the Financial Services (Enterprise) industry, it’s ranked #34.
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DKNG shares were trading at $39.00 per share on Wednesday afternoon, down $0.06 (-0.15%). Year-to-date, DKNG has gained 264.49%, versus a 9.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Anmol Suratkal
Anmol began his career as a financial writer and evolved into an investment analyst and journalist with a special interest in risky instruments. He specializes in analyzing financial data and writes insightful articles to help investors generate solid long-term returns. More...
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