Microvast (MVST) is going public via a SPAC merger with Tuscan Holdings (THCB). The deal, which gives Microvast an implied pro forma equity value of approximately $3 billion, is about to close. What's MVST's stock forecast after the THCB SPAC merger? Is the stock a good buy now?
Founded in 2006, Microvast develops lithium-ion batteries for commercial and specialty EVs (electric vehicles). These batteries are designed for both fast charging and long life cycles.
The Microvast-THCB merger date
Voting on the proposed merger is scheduled to take place on Jul. 21 at 9:00 a.m. ET. The transaction is expected to close immediately after it's approved by THCB shareholders. Microvast stock will trade on the Nasdaq under a new ticker symbol, “MVST”.
Microvast’s stock forecast after the merger
Currently, Microvast stock isn't covered by analysts. However, given that it's a leading global provider of battery solutions, analysts should soon start covering it.
Based on THCB’s current price, Microvast has an enterprise value of $2.7 billion. Based on this value and Microvast’s forecast total revenue, its valuation multiples for 2021 and 2022 are 11.7x and 5.9x, respectively. The high-growth stock’s 2025 enterprise-to-sales multiple of 1.1x looks much more attractive and more reasonable than Romeo Power's next-12-month enterprise-to-sales multiples of 13.7x.
Microvast stock is set to climb after the merger
Microvast’s stock outlook looks promising. Although EVs account for just 1.5 percent of the commercial vehicle industry, Microvast believes that fleet operators are planning to pursue electrification aggressively in the next few years. Commercial EV penetration is expected to reach 9 percent by 2025. Since the battery is the most expensive component of EVs, accounting for 30 to 40 percent of their value, Microvast believes that it will be at the core of a large addressable market.
The company also plans to enter the energy storage, passenger vehicle, and consumer electronics markets. Furthermore, Microvast is more established than QuantumScape, another EV battery manufacturer, so it should suffer less execution risk. QuantumScape expects to begin generating revenue in 2024.
Microvast is a good long-term investment
THCB stock’s 56 percent pullback from its peak has opened an entry opportunity to Microvast, which has bright growth prospects. Microvast has R&D relationships with BMW and other research institutions, and its customers include Oshkosh, Porsche, and CNH Industrial. Its contracted revenue for 2021 is expected to be at $230 million, and Microvast expects revenue of $2.3 billion in 2025. It expects to turn adjusted-EBITDA-positive in 2021, and foresees adjusted EBITDA of $465 million in 2025.
As part of its merger with THCB, Microvast will get gross proceeds of about $282 million in cash held by THCB in trust and $540 million in PIPE (private investment in public equity) at $10 per share. The PIPE investors include BlackRock, Koch Strategic Platforms, and InterPrivate. Microvast will use the funds to expand its manufacturing activities and reach its global production capacity goal of 9 gigawatt hours by 2022.
What happens to THCB after the merger?
Upon closure of the transaction, THCB stock will immediately convert to Microvast stock and cease to exist in its SPAC avatar.