SHLL stock is the one most small-cap investors are talking about this month. We will be the first to say that August has not seen many stocks making huge moves; however, SHLL stock is the one exception. As you can see from the chart below, we have gotten a Nikola like move and we could just be getting started. In this article, we take a look at what’s the story behind SHLL stock and what’s driving the rally.
SHLL stock, or Tortoise Acquisition Corp, is a special purpose acquisition company formed for the purpose of effecting a merger, stock exchange, acquisition, reorganization, or similar business combination with one or more businesses. Tortoise’s expertise spans across the entire energy and infrastructure value chain. Its strategy has been to combine with a company to take advantage of the global opportunities created by the energy transition including clean energy generation and storage, alternative fuels and transportation, technological advances, and changes in energy policies.
Headquartered in Austin, Texas, Hyliion’s mission is to reduce the carbon intensity and greenhouse gas (GHG) emissions of commercial transportation Class 8 vehicles by being the leading provider of electrified powertrain solutions. Leveraging advanced software algorithms and data analytics capabilities, Hyliion offers fleets an easy, efficient system to decrease fuel and operating expenses while seamlessly integrating with their existing fleet operations. It designs, develops, and sells electrified powertrain solutions for Heavy Duty Class 8 trucks from any of the leading commercial vehicle manufacturers, transforming the transportation industry’s environmental impact at scale.
SHLL Stock Merger
Hyliion will be merging with SHLL stock and the newly combined company will remain on the New York Stock Exchange under the new ticker symbol HYLN. At $10 a share when the merger agreement was signed, the implied market cap was $1.5 billion. At $40 a share, the market cap is $6 billion and this is still very cheap when Nikola sports a $15 billion market cap. Once the merger is completed, we expect SHLL stock to close the valuation gap with Nikola. This is why the stock is running. Smart money is buying before this arbitrage opportunity no longer exists.
The transaction is expected to close 3Q 2020, which is before September 30th. The transaction includes an upsized $325 million fully committed PIPE. Proceeds will be used to fully fund the commercialization and mass production of the company’s electrified powertrain solutions. Founder and CEO Thomas Healy will be joined by Tortoise Acquisition Corp.’s Vince Cubbage and Stephen Pang in a newly formed board of directors.
The company will receive $560M of proceeds from an upsized $325M PIPE, along with cash held in trust assuming no public shareholders of Tortoise Acquisition Corp. exercise their redemption rights at closing and it will be used to accelerate product commercialization, product production, operational growth and for general corporate purposes.
Hyliion has two products, a hybrid drive system for existing diesel-powered trucks, and its Hypertruck ERX, which is an all-electric drive system for heavy-duty trucks. The hybrid system is available for purchase today. Penske Automotive and Ryder, among others, are customers.
The ERX is slated to begin trials with customers in 2021, with volume production ramping up in 2022. It has a small battery pack that can be charged onboard by a natural-gas-fired generator. It is a unique setup that saves truckers’ weight.
Hyliion is seeking to disrupt the heavy-duty truck business, but it doesn’t want to build vehicles. It wants to sell its powertrain solutions to existing truck makers. In that way, the company is more analogous to Cummins than Tesla. A Cummins diesel engine, for instance, is available as an option on Paccar’s Peterbilt trucks.
What Differentiates Hyliion From Nikola or Tesla?
The product Hyliion produces is a retrofit with a hybrid drivetrain. The upside is that a retrofit is much less costly than buying new. The short-haul transportation industry can go EV at a bargain price, and be environmentally friendly at the same time. With states and countries passing regulatory mandates on future emissions on a regular basis, the demand is there.
Hyliion’s current technology (burning renewable natural gas) already has a widespread infrastructure for refueling long haul trucks, while Nikola does not yet. Also, in just 2 or 3 years, Hyliion expects to have a pure EV truck (the ERX) for long haul trucking too.
We like the potential of hydrogen, but for the U.S. market, the infrastructure, as well as fuel supply, favors SHLL stock.
Hyliion expects to have $344 million in sales in 2022, rising to $2.1 billion in 2024. The company’s projections have it earning $8 million in Ebitda, or earnings before interest, taxes, and depreciation, in two years. That grows to $602 million four years from now.
There’s already a strong interest in Hyliion. Agility, a global logistics company based in Kuwait, has a preorder for 1,000 ERX powertrains. Agility has also taken an equity stake in Hyliion, as part of the $325 million PIPE.
SHLL Stock Bottom Line
It’s about time SHLL stock made a move. One of the problems has been that the company doesn’t get the attention that Nikola’s Trevor Milton or Tesla’s Elon Musk does. The company is not trying to be revolutionary and change the entire US trucking and logistics market. Instead, Hyliion has looked at the market dynamics and come up with a business plan that makes the most sense. It’s not a battery company as battery-powered trucks would become too heavy and it’s not trying to build a hydrogen truck where the US lacks the infrastructure. Instead, Hyliion is provide a cost-effective solution and one that we believe will be tremendously successful. SHLL stock looks to be the better bet over Nikola and why dips should be bought.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in NYSE:SHLL or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article. Insider Financial is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This article is not a solicitation or recommendation to buy, sell, or hold securities. This article is meant for informational and educational purposes only and does not provide investment advice.
Image Courtesy of Transport Topics