Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
Hyliion stock will begin trading on the New York Stock Exchange Friday, Oct. 2. The company is merging with Tortoise Acquisition Corp. (NYSE: SHLL) after a vote by SHLL shareholders on Monday, Sept. 28.
Tortoise Acquisition is up 370% since its IPO in June, from $10 to $47.
The Hyliion reverse merger is big news in the SPAC world, only weeks after Nikola stock fell from grace. Initially, Nikola traded for $73, but it has since dropped to $19 after rumors of fraud by CEO Trevor Milton.
This might have many investors second-guessing electric vehicle stocks - and the whole special purpose acquisition company (SPAC) model of investment. But just because Nikola appears to be a dud right now does not mean there aren't still huge opportunities for stocks in this field.
Hyliion is quite a different animal from Nikola in almost every respect. Today, you're going to see why - and whether or not you should buy it.
Why SPACs Are Still a Big Deal
SPACs took the limelight in 2020 as fewer business leaders trusted a fickle IPO market to generate revenue. It left a gap of IPO investors looking for a similar investment opportunity.
In came SPACs. There have been more than 100 SPAC IPOs this year, generating about $42 billion in proceeds.
These are otherwise referred to as "blank check" companies. They are started by venture capitalists looking to profit from emerging industries. Investors buy units of a SPAC, essentially putting their trust in the leaders to invest in something profitable.
Many SPAC investments have gone toward electric vehicle companies this year, as the industry has started to rear its head. DiamondPeak Holdings Corp. (NASDAQ: DPHC) has more than doubled since its IPO, from $10 to $26, a 160% pop.
Nikola also went public through a SPAC called VectoIQ.
Unfortunately, that's not looking so good right now. But there's a silver lining here...
What Happened to Nikola Stock?
Unfortunately, Nikola has not performed as well as other electric vehicle SPACs, despite significantly more hype. In fact, it got itself in some trouble in mid-September.
A short seller report from Hindenburg Research claimed it had "extensive evidence" for years of fraud by the company. Many were calling its CEO, Trevor Milton, untrustworthy.
WARNING: 22 million shares of this stock trade hands every day - make sure you're nowhere near it. Click here...
Milton was fined by the U.S. Securities and Exchange Commission for some Twitter remarks defending against accusations. He was later forced to resign.
Milton's erratic behavior has been compared to fellow firebrand CEO Elon Musk, who's drawn criticism for allegedly moving the Tesla Inc. (NASDAQ: TSLA) stock price with his tweets.
Nikola stock is now down 80% from its peak price of $73 and is still falling.
That's not to say Nikola is finished. But there are more trustworthy investments you can make in the electric vehicle market. "Disruptive" companies don't necessarily need "disruptive" personalities at the helm.
What Makes Hyliion Stock Different
Hyliion CEO Thomas Healy is described as the direct opposite of Milton, personality-wise. He's a 28-year-old billionaire known for his "low-key" demeanor.
Healy is quoted saying, "Our strategy is to build Class A electrified drivetrains, not to create buzz around the stock."
That's only an added benefit to a business model that blows the rest of the electric vehicle industry out of the water.
For starters, Hyliion does not provide the truck itself, but the thing that powers the truck. And the thing that powers the truck simply does a better job than its competition...
Hyliion uses renewable natural gas instead of hydrogen to make electricity. Compared to several other electric vehicle companies, this one taps into a much more accessible source of energy.
The company wants to replace diesel engines in all heavy-duty trucks. That means this is an opportunity to invest higher up in the supply chain.
According to Torstoise Acquisitions CEO Vince Cubbage, there is "currently no opportunity to capture hydrogen and use it for energy," although it has been a very highly anticipated technology in recent years.
Renewable natural gas is more plentiful than hydrogen. It's zero-emission, not a fossil fuel, and it's going to sell like hotcakes to truck companies around the country.
It's already doing so right now, compared to Nikola and friends. That is to say, Hyliion has sales, and Nikola does not.
Here's a closer look at Hyliion.
Hyliion Stock Outlook So Far
Hyliion already has a preorder of 1,000 of its new 1,000 fully electric drivetrains from one of the largest logistics companies in the world, Agility. Credibility like that is going to compound with time.
Cities around the world are adopting new emissions laws - if not restrictions, then tax exemptions to encourage lower emissions.
The most blatant move toward lower emissions in the United States took place recently in California. The state has begun a phasing-out of sales of gas-powered cars by 2035.
It's likely not the first motion like this we'll see in the coming years. And Hyliion is doing everything a company can to get ahead of that trend.
Hyliion seeks to meet the primary needs of truck fleets in a low-emission America. Those are cost savings and lower emissions, without sacrificing efficient hauling.
An important value for truckers here is the cost of producing electricity. With Hyliion's powertrain, it's 30% lower than drawing electricity from the grid.
Hyliion is worth more than $7.2 billion.
The company was approved to go public on Monday, Sept. 28, by Tortoise shareholders.
It merged back in July, sending Tortoise stock soaring more than 300% between then and now. Shares of Torstoise Acquisitions began at $9.50.
Hyliion will get $560 million raised in the Tortoise IPO. Now, investors will await only the stock's ticker to change on the NYSE, from SHLL to HYLN.
Tortoise is also unveiling another SPAC on the heels of this success. On Friday, Oct. 3, Tortoise Acquisition Corp. II will trade under the ticker SNPR. That's a great opportunity for investors who missed out on SHLL but still want a pop from this so-far trusty SPAC.
This second SPAC from Tortoise will look broadly for another "energy transition or sustainability" business.
Before you invest in any of these, here's something to consider about the SNPR IPO...
Should You Invest in the Tortoise Acquisitions II IPO?
There tends to be a lot of hype going into IPOs. IPO investors often look for that bump in the early stages from that hype alone.
Many of those investors will also sell early on, once the honeymoon is over.
For this reason, IPO investing can be volatile. You see this with almost every stock, whether the IPO is successful or not.
Lyft Inc. (NASDAQ: LYFT) was an IPO horror story, going from above $70 to below $30 since its IPO - a loss of about 60%.
Snowflake Inc. (NASDAQ: SNOW), one of the most exciting software IPOs this decade, started above $250 and fell to $227 its first day trading, a loss of 9.2%.
The difference between these stocks is that Snowflake is back up to the $250 mark now. It had the better business model.
If you want to find a stock with a price driven by a sound business model and financials, you could do worse than Tortoise Acquisitions, a company that's surveyed hundreds of SPACs to find the most promising, sustainable investments in the years to come.
In fact, investors in Hyliion could probably still get a decent pop in the next year if they buy now.
Tortoise Acquisitions II may have similar potential.
But if you're looking for more certain upside in your investment, you're not being naïve. There are stocks out there, already trading - not SPACs or IPOs - with the same potential.
The only difference is that more is known about them...
Three Stocks Even Better Than Hyliion
Chief Investment Strategist Shah Gilani just held his first-ever stock-picking lightning round event - running through more than 50 stocks to tell you if they are stocks to buy or stocks to sell.
Dozens are overpriced and overhyped - you should ditch them ASAP.
But Shah says THESE three stocks are "screaming buys."
All three are trading at a discount... they're under-the-radar companies most people haven't even heard of... and they have massive tailwinds ready to send their share prices into the stratosphere.
To get the company names, tickers, and price targets for Shah's picks, go here now.
Follow Money Morning onFacebook and Twitter.
About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.