Should You Buy NXU Stock Before the Energy Vault Merger?

In Sept. 2021, Energy Vault announced a merger with Novus Capital Corporation II. Should you buy NXU stock before the merger?

Mohit Oberoi, CFA - Author

Oct. 25 2021, Published 10:32 a.m. ET

Energy Vault energy storage products
Source: Energy Vault Twitter

In Sept. 2021, green energy company Energy Vault announced that it will be going public through a reverse merger with Novus Capital Corporation II (NXU). There has been a flurry of SPAC mergers in the green industry over the last year. What’s the forecast for Energy Vault, stock, and should you buy it now before the merger?

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Over the last six months, green energy stocks have been volatile, especially those that have gone public through SPAC mergers. However, NXU stock has been quite stable, with a 52-week trading range of $9.58–$10.15. One reason for that stability could be the announcement of NXU's merger with Energy Vault in Sept. 2021.

Energy Vault's IPO date and price

Since Energy Vault has opted for a SPAC merger to go public, it doesn't have an IPO date or price. However, the business combination with NXU is expected to close in the first quarter of 2022. After the business combination, the merged entity will trade under the ticker symbol “GWHR”.

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As part of the merger, Energy Vault will get around $388 million, including $100 million in PIPE (private investment in public equity) and another $288 million held in the SPAC's trust account. The merger is subject to stockholder approval, and the cash that Energy Vault receives from the merger will depend on redemptions. Lately, many SPAC stockholders have opted for redeeming their units, leaving SPACs short of cash.

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Energy Vault's stock forecast

Renewable energy generation can depend on the weather, and energy storage can allay apprehension about sudden demand-supply mismatches. Energy Vault has developed a gravity energy storage platform to better manage demand and supply. The forecast for energy storage looks positive. According to Energy Vault, the total cost of owning its energy storage solutions is lower than that of lithium-ion batteries.

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Should you buy Energy Vault stock?

The deal with NXU gave Energy Vault an enterprise value of around $1.1 billion. The company expects the cash it receives from the business combination will fund its operations by 2024, when the company expects to become cash-flow positive. The company sees a massive total addressable market for itself and based on reports, it projects a $640 billion global investment in energy storage by 2040.

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The company has over 360 engagements with customers, representing potential revenue of $32 billion over the next five to ten years. In 2024, the company forecasts revenue of $1.52 billion and an adjusted EBITDA margin of 24 percent, or $366 million. In 2025, the company expects its EBITDA to rise to $662 million.

Based on its projected earnings and valuation, Energy Vault stock looks reasonably priced. However, long-term forecasts should always be taken with a grain of salt, as the numbers may be subject to several uncertainties.


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