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July 8, 2020

Buy SHLL Before it Becomes HLYN?

Frank Cabibi

As mentioned in the previous article, SPACs are doing very well in 2020 as EV and new competitors enter the market. After doing analysis on Nikola Motors, BurgerFi and Opes, I've been given some recommendations from members in the community. Here is another SPAC (Special Acquisition Company) that is doing something similar in the electric vehicle industry. I will also talk about another stock merger at the end on this article that I think is worth looking at.

Overview

Late last month, SHLL (Tortoise Acquisition Corp.) officially announced that they will merge with the company Hyliion Inc. The new ticker symbol will become HYLN as shares of Tortoise Acq. turns in shares of Hyliion under the NYSE.

At some point in Q3, the two companies will combine giving Hyliion an estimated total market cap of $1.5 billion, according to businesswire. Hyliion will then receive $560 million, and private investors will get their subscription price of $10.00 per share. This means that private investors have access to the price at a greater discount, and they can decide to close their positions if they want to. That could be something to look out for because it is possible to see a sell off once the merger is complete. Assuming no shareholders decide to sell, it could be a good sign for us traders who are not in private equity. After Hyliion receives their funds, they will be able to optimize their potential to grow operations and manufacture more products. Although it's yet to be announced, the merger is expected to be completed at the end of Q3.

A little about Hyliion

Originally a motorsport racer and engineer, Thomas Healy turned to implementing his EV ideas from the sport into his own company, Hyliion, of Class 8 Trucks back in 2015.

https://www.hyliion.com/wp-content/uploads/2020/06/Hyliion-Tortoise-Overview-Presentation.pdf

This was taken directly from the Hyliion website. This table is comparing the cost of each truck over 7 years of 100,000 miles driven. Note that these are estimates, but they will give you a pretty good idea of what to look at in the coming years. The circled number is the estimated 7-year total cost of ownership which is significantly cheaper than both Tesla and Nikola Motors. The last row is the estimated savings on diesel costs. Right now, owning a Tesla or Nikola truck will actually lose you money on the investment, whereas Hyliion's trucks will save you 35% on diesel costs over 7 years.

https://www.hyliion.com/wp-content/uploads/2020/06/Hyliion-Tortoise-Overview-Presentation.pdf

This was also taken from the same site above comparing the range, payload capacity, charge time, 0-60 performance. In my opinion, the most important things to look at in these EVs are the range, capacity and charge time. I don't think a 0-60 matters as much for semi-trucks, I actually think it would be more dangerous for a truck like that to be able to reach 60 mph in a shorter period of time. I would be more concerned about how fast a semi-truck can go from 60-0 mph for safety reasons. On charge time, Hyliion and Nikola have the fastest times of 10 minutes to fuel back up. Hyliion trucks can go the farthest without needing a recharge and can also carry a much greater load than both Nikola and Tesla, as well as standard diesel trucks. I actually strongly encourage you to look at the website links I placed below the two pictures above, and check it out for yourself. I'm just scratching the surface of what this company does as I try to make these articles brief, but I definitely think this is worth looking into for yourself.

https://www.hyliion.com/wp-content/uploads/2020/06/Hyliion-Tortoise-Overview-Presentation.pdf

These number are in millions of dollars for their estimated financials in 2020-2024. As you can see, Hyliion doesn't plan on making profit until 2022 on EBITA (Earnings Before Interest, Taxes and Amortization). This is due to their expansion phase they plan to take on after they go public and become a much larger company. I've said this before, but Tesla has not been known for making lots of profit *yet*. Tesla, believe it or not, is still in it's early stages of growth as it expands to become the leading company in the EV business. Their stock traded at a higher price than any other automotive company even before they started making money. That's because they spend lots of money on growing their business; companies in early growth phases tend to reach a certain level of debt and use it as an asset for further operations. I think a big thing to look out for is how quickly and how much Hyliion can generate revenue which will boost their net income and cushion losses on their expenses.

Conclusion

Overall, I really like this company over most competitors in the industry. But, there are always risks involved. Assuming nothing goes wrong, this stock will be one to hold for years. The problem is that these plays are highly speculative; most of the data are estimated and no one can predict the future. Hyliion could generate zero or negative EBITA for 2022 or it could be much better than it's current estimate. In the end, if you are a young investor, it's the best time to take risks. I'm not saying to go out and buy this stock, but it's easier to take the chance on speculative plays than when you're starting to think about retirement. And I think buying SHLL before the merger could be a good play.

Featured Photo: https://h7f7z2r7.stackpathcdn.com/sites/default/files/images/articles/biza-hyliion.jpg


NETE Mullen Merger

I'll keep this one brief and just talk about the merger as well as why I think this stock is worth considering.

Net Element (NYSE: NETE) is going to merge with Mullen Technology Company, and will also close the deal at some point this quarter like Hyliion. Mullen technologies is an AI company that also produces electric cars. Upon this merger, management will change, and the CEO of Mullen will be the head of Net Element. Because 15% of shares will be given to NETE shareholders, the ticker symbol will not change and continue trading on the NYSE under NETE.

This California based company not only produces EVs but also services an AI-based platform called CarHub that provides an quick and easy way to buy or sell cars. This company's valuation is around $248 million which is relatively small compared to other companies in the industry. According to Zacks SCR, Mullen company supposedly has some highly valuable intellectual property. Taken directly from that article, they mentioned that, "It has valuable lithium battery patents to create batteries rivaling Tesla’s technology. It has a joint venture with Ukrainian company NextMetals Ltd. to create a solid-state battery under a new division called 'Mullen Next'".

The stock has already jumped over 200% since June and is near previous highs. SHLL also had a similar jump after the hype of news on their merger. If NETE can stay above support in the $10.50s. I would probably think about purchasing some of this for myself before the merger happens.


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Disclaimer:

Please note that this email is my personal opinion only. I am not a licensed financial advisor, and any information shared or discussed is not to be construed as investment advice. Trading and investing involves a degree of risk, and is not suitable to all investors. Please consult with your financial advisor before making any sort of investment decisions.

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