NGAC Stock Price Increased 5.39%: Why It Happened

By Amit Chowdhry ● February 22, 2021
  • The stock price of NextGen Acquisition (NASDAQ: NGAC) increased by 5.39%. This is why it happened.

The stock price of NextGen Acquisition (NASDAQ: NGAC) increased by 5.39% as it went from a previous close of $13.18 to $13.89. Investors are responding to Xos — a leading manufacturer of fully electric Class 5 to Class 8 commercial vehicles and NextGen Acquisition Corp. (Nasdaq: NGAC), a publicly-traded special purpose acquisition company (SPAC), announcing today that they have entered into a definitive business combination agreement that will result in Xos becoming a publicly listed company. The combined company is expected to be traded on The Nasdaq Stock Market under “XOS.”

Xos had developed its vehicles to meet the demands and extended life cycles of last-mile, on-highway, and vocational vehicles. And Xos believes it is well-positioned to capitalize on the electrification of the $100 billion total addressable market for medium- and heavy-duty last-mile commercial electric vehicles. 

The company’s 6,000+ unit backlog of contracted and optional orders underscores robust market opportunities for Xos’ vehicle products.

And demand in the last-mile commercial EV market is expected to grow at a 35% CAGR through 2040 as electric vehicles replace traditional fossil fuel vehicles, driven by new emissions standards, the continued growth of e-commerce, and the relocation of fulfillment centers to areas closer to consumers. 

Xos’ trucks are powered by its proprietary technology, developed to meet the needs of commercial fleets, and designed to achieve a TCO that is lower than traditional fossil fuel vehicles and other electric vehicle alternatives. And Xos offers Fleet-as-a-Service—a bundled package that provides vehicle ownership services to fleet operators for a fixed monthly fee — in coordination with partners such as DLL Group (financing services) and Dickinson Fleet Services (vehicle maintenance). The Fleet-as-a-Service package aggregates otherwise fragmented fleet service offerings and is projected to significantly increase Xos’ lifetime revenue per vehicle.

Along with Dakota Semler and Giordano Sordoni, Xos will continue to be led by its existing management team including Chief Technology Officer Robert Ferber and Chief Financial Officer Kingsley Afemikhe.

The business combination values the combined company at a $2 billion pro forma equity value, at a price of $10.00 per NextGen share and assuming no redemptions by NextGen shareholders. 

And the deal will provide $575 million of gross proceeds to the company, assuming no redemptions, including a $220 million oversubscribed and fully committed common stock PIPE at $10 per share anchored by Janus Henderson Investors, as well as a consortium of truck dealers led by Thompson Truck Centers.

The boards of directors of both Xos and NextGen have each unanimously approved the proposed business combination — which is expected to be completed in the second quarter of 2021, subject to the approval by NextGen’s shareholders of the business combination, the concurrent PIPE transaction, satisfaction of the conditions stated in the definitive agreement and other customary closing conditions.

KEY QUOTES:

“In 2016, my co-founder and I set out to build a company whose mission was to decarbonize transportation through the design, engineering and development of purpose-built commercial vehicles. Our aim was to provide customers a superior alternative to traditional fossil fuel vehicles. As former fleet operators, we gained a deep appreciation for the challenges of operating and maintaining commercial fleets, particularly in light of accelerating emissions requirements. Xos developed its technology and product portfolio in close collaboration with established fleet operators who have provided invaluable ongoing feedback that has informed every aspect of our vehicle design, product engineering, commercial manufacturing and service strategy. As a result, we have developed commercial EV solutions that uniquely incorporate customer requirements.”

— Dakota Semler, Co-Founder and CEO of Xos

“Since 2019, we have had vehicles on the road and in the hands of our customers, which include UPS, Wiggins, Lonestar and Loomis, validating our durable and low-cost sustainable design. Today’s announcement represents a major milestone that allows Xos to expand its vehicle and battery manufacturing capacity, advance our next generation battery and vehicle control systems, and put thousands more Xos vehicles on the road.”

— Xos’ Co-Founder and COO, Giordano Sordoni

“The strong secular tailwinds of climate change and e-commerce anchor our investment conviction in Xos. Climate change is one of the world’s greatest challenges, and commercial trucks are the largest emitters per capita of greenhouse gases in the transportation industry. Simultaneously, last-mile e-commerce delivery is growing, accelerated by changes in consumer purchasing behaviors post-COVID. The dual drivers of strong underlying industry growth and the imperative to transition traditional fossil fuel vehicles to zero emission vehicles, set the backdrop for strong underlying growth for years to come. Xos has successfully commercialized its cost competitive proprietary product offering and is now poised to scale delivery of its customer-validated vehicles with the growth capital that NextGen will provide.”

— George Mattson, Co-Founder and Co-Chairman of NextGen

“NextGen reviewed over a hundred potential merger opportunities and conducted in-depth evaluations of several companies in the EV and automotive technology sectors. Based on our work, we believe that Xos is best-positioned to capture the rapidly growing demand for commercial electrical vehicles with a compelling customer offering. We look forward to working with Xos’ leadership team by providing strategic, operating and governance experience to help Xos realize its vision of decarbonizing commercial transportation.”

— Gregory Summe, Co-Founder and Co-Chairman of NextGen

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.