One of the big problems with buying SPACs before they have identified a target company to bring public with a reverse merger is that you never know what type of business you are going to end up with. Some investors are willing to leave things up to chance and buy these stocks pre-merger, especially given how popular SPACs have become as of late. However, if you are interested in SPACs, perhaps the best way to get involved is to buy them after they have completed their mergers. That way, you can perform better due diligence and make sure you are buying a company that you truly believe in.
Several SPACs that have gone from pure speculative plays to legitimate companies are worth a look at this time. These are all stocks that are performing well in the market and have intriguing business models that make them worthy of consideration. Let’s take a look at 3 post-merger SPACs that are showing serious strength at this time.
1. QuantumScape
If you are an investor that still believes the rally in EV stocks has legs, Quantumscape (NYSE:QS) should be a company that draws your attention. Formed from the SPAC Kensington Capital Acquisition Corp, this company is engaged in the development of solid-state lithium-metal batteries that are used to power electric vehicles. These batteries could make a huge impact on the EV industry because they cost less, provide longer battery life, and also recharge faster than the existing battery technology. Some of the early performance data showed that the company’s solid-state separators can work at very high rates of power, enabling a 15-minute charge to 80% capacity.
It’s worth noting that QuantumScape is a startup company that has no revenue and reported a significant net loss in 2020. That means you are essentially buying into the company’s vision and potential to innovate with its proprietary battery technology. With that said, major German carmaker Volkswagen (DE:VOWG_p) (OTC:VWAGY) has invested $300 million into QuantumScape, which is a solid vote of confidence to consider. QuantumScape is targeting its first commercial production in 2024 and has been one of the best-performing post-merger SPACs to consider adding shares of. The stock is up over 170% since the merger took place back in November.
2. DraftKings
Another post-merger SPAC stock that has been showing relative strength is DraftKings, which might be the best stock to own if you want exposure to the growing online sports betting industry. DraftKings (NASDAQ:DKNG) is a digital sports entertainment and gaming company that is the leader in daily fantasy sports in the United States. With services like daily sports, sports betting, and iGaming, the company’s offerings have tons of potential given the way that online gaming is growing. Keep in mind that more states are legalizing sports betting every month and that the industry is really in its infancy, which means a company like DraftKings has a ton of room for growth.
DraftKings has been putting up the earnings results to back up the hype, which is another good reason to consider adding shares even if it’s trading around all-time highs. The company’s Q4 results were quite impressive, given that it reported a 98% year-over-year increase in revenue to $322 million and increased its 2021 revenue guidance from a range of $750 million to $850 million to a range of $900 million to $1 billion. With recent announcements like a deal to become UFC’s first official exclusive sportsbook and daily fantasy partner and a stock price that continues to hit new highs, this is certainly a post-merger SPAC to keep an eye on this year.
3. Mp Materials Corp
Last but not least is Mp Materials (NYSE:MP), a company that is the largest producer of rare earth materials in the Western Hemisphere. Rare earth metals are used to create some of the most important technology today, including things like electric vehicles, wind turbines, drones, robots, and more. That tells us that Mp Materials has a chance to play a key role in some of the highest-growth industries of the future.
It’s also worth mentioning that Mp Materials is one of the only non-China-based companies in the rare earth industry, which could be a big benefit should China start to limit the exports of these valuable materials. Mp Materials reported strong earnings recently that saw Q4 revenue grow 100% year-over-year to $42.2 million along with year-over-year adjusted EBITDA growth of 297% to $18 million. The stock is up over 54% year-to-date and is a post-merger SPAC that seems to be working out for early investors so far.