EVgo Merges With CLII SPAC, Stock Could Be a Short Squeeze Target
EVgo and CLII concluded their business combination on July 1. What's EVgo's stock forecast and how high can it go after the CLII merger?
July 2 2021, Published 11:58 a.m. ET
On Jan. 22, EVgo Services (EVGO) agreed to go public by merging with SPAC Climate Change Crisis Real Impact I Acquisition (CLII) at an implied pro forma equity value of approximately $2.6 billion. Recently, the companies completed their business combination. What's EVgo's stock forecast and how high can it go after the merger?
EVgo provides fast charging networks for electric vehicles in the U.S. The company uses 100 percent renewable power. The combined company will retain its senior management team and will be led by CEO Cathy Zoi.
EVgo-CLII merger details
EVgo completed its business combination with CLII on July 1. EVgo’s Class A common stock and warrants will start trading on the Nasdaq under the ticker symbols “EVGO” and “EVGOW,” respectively, from July 2 onwards. The merger was approved by CLII shareholders on June 29.
As part of its merger with CLII, EVgo is expected to receive cash proceeds of $575 million, which includes $400 million as PIPE at $10 per share. The PIPE investors include Pacific Investment Management Company, BlackRock, Wellington Management, and Neuberger Berman Funds. EVgo will use the money for growth.
EVgo’s stock forecast
Currently, EVgo stock is being tracked by just one Wall Street analyst, who has given the stock a buy recommendation and a target price of $21.
EVgo’s valuation
CLII assigned EVgo a pro forma EV (enterprise value) of $2.1 billion. However, based on CLII stock's current market price of $14.36, the market cap is close to $3.8 billion and the EV is about $3.0 billion. In the investor presentation, EVgo said that it expects to post revenues of $20 million in 2021, which would mean a 2021 EV-to-sales multiple of 150x.
Since EVgo is a high-growth stock, we should look further into the future—the multiple gets more attractive based on its 2025 revenue at 5x. ChargePoint and Blink Charging are trading at NTM EV-to-sales multiples of 41x and 99x, respectively.
How high can EVgo stock go after the merger?
EVgo stock is expected to be a short squeeze target due to its high short interest ratio. According to Fintel, on July 1, around 269,771 CLII shares were sold short, which represents almost 39 percent of the volumes that day. Also, index funds and mutual funds are expected to buy EVgo stock since they usually don't buy until a merger deal is sealed. After the merger is completed, funds can purchase shares that fit their investment strategies and objectives. The stock can reach $20 in the near term, which suggests 39 percent growth from the current price.
EVgo stock is a good long-term investment.
EVgo provides 800 fast-charging stations for EVs serving more than 65 metropolitan areas across 34 U.S. states. The company expects revenue of $20 million in 2021 and foresees that rising 164 percent YoY to $54 million in 2022. Between 2021 and 2024, the company expects its revenue to grow 152 percent compounded annually.
Overall, the industry continues to expand as the U. S. seeks to catch up with China and Europe in the global electric vehicle race. EVgo is expected to benefit from President Joe Biden’s plan to invest $7.5 billion towards developing public EV infrastructure.
What happens to CLII after the merger?
CLII stock will automatically convert to EVgo stock and won't exist anymore in its SPAC avatar.