SES EV batteries
Source: SES LinkedIn

IVAN SPAC Stock Looks Like a Bargain Before the SES Merger


Jul. 14 2021, Published 7:24 a.m. ET

The Ivanhoe Capital Acquisition (IVAN) SPAC is taking EV (electric vehicle) battery maker SES Holdings public. The deal, which gives SES an implied pro forma equity value of approximately $3.6 billion, is expected to close in the third or fourth quarter of 2021. Is IVAN stock a good buy before the SES merger date?

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After the transaction closes, IVAN public shareholders and sponsors will own 8.8 percent of SES, while PIPE (private investment in public equity) investors will own 6.1 percent.

The IVAN SPAC’s sponsor

In its Jan. 2021 IPO, the IVAN SPAC raised $240 million by offering 24 million shares for $10 each. The Singapore-based SPAC is led by CEO and chairman Robert Friedland and CFO Gary Gartner. Friedland is the founder and CEO of Ivanhoe Capital Corporation.

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buy ivan stock before ses merger
Source: SES LinkedIn

The details of the IVAN-SES merger

While both companies expect the transaction to close by the end of 2021, a definite date hasn't been set. The business combination has been unanimously approved by the boards of directors of both SES and IVAN.

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Under the terms of the deal, SES will receive $476 million in gross proceeds, including $276 million in cash held by IVAN in trust. After the merger closes, the combined entity will trade on the NYSE under the ticker symbol “SES.”

buy ivan stock before ses merger
Source: SES LinkedIn
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PIPE investment in SES

The IVAN-SES deal also includes $200 million in PIPE at $10 per share. PIPE investors include Koch Strategic Platforms, Hyundai Motor, Geely Holding Group, Kia Corporation, SAIC Motor, and General Motors. SES will use the money for growth.

IVAN stock fell on merger news

IVAN stock fell 4 percent on Jul. 13 following the merger news, signaling that investors were disappointed with the deal. However, the stock has gained 0.6 percent in premarket trading on Jul. 14. General Motors and several other automakers expect a battle over battery supplies amid the global boom in EVs.

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SES’s valuation

IVAN has assigned SES a pro forma implied enterprise value of $2.7 billion. Based on this enterprise value and SES’s projected total revenue, its valuation multiples for 2024 and 2025 are 26.8x and 5.4x, respectively.

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IVAN stock is a good buy before the SES merger

Founded in 2012, SES manufactures hybrid lithium-metal rechargeable batteries for EVs. The cash from the SPAC transaction and going public will help fund SES's commercialization phase in 2025. General Motors is exploring lithium-metal batteries as a higher-capacity, lower-cost replacement for lithium-ion batteries.

SES is in the pre-production, pre-revenue phase. The company forecasts revenue of $0.5 billion in 2025 and expects to turn EBITDA-positive in 2026. SES also expects to capture a 5 percent market share by 2028. The number of EVs on the road globally is set to increase to 145 million by 2030, up from 10 million in 2020.

SES faces competition from QuantumScape

SES faces major competition from QuantumScape, which also develops solid-state lithium-metal batteries for use in EVs. The company plans to start production in 2024, and expects to generate revenue of $14 million in 2024 and $39 million in 2025. Considering that QuantumScape is trading at a 2025 EV-to-sales multiple of 203x, SES stock looks undervalued and worth considering.


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