I'll be one of the first to say companies that have completed the SPAC merger process and now trade with their new ticker under their new name shouldn't be lumped into the same sentence with pre-merger SPACs, whether on a letter of intent or still in the kicking the tires process.
Now I'm going to contradict myself, somewhat, and say I don't like the trend I'm seeing develop in many post-SPAC names. Companies that presented the market only a few months ago with financial projections for not only the next year, but five years out, seem to be changing their tunes quickly. Anyone who has been doing this for more than a few years knows that companies love to offer up hockey stick revenue and growth projections, and many of the companies that have come public via SPACs have had to do that because they are pre-revenue.
The disturbing trend we are seeing as of late though is how quickly the projections for 2021 have been reduced. Once that happens, how can investors put any faith in the numbers for 2025 or 2027? Heck what about 2022 and 2023?
Canoo (GOEV) was a name recently in the news for the sweeping changes in the C-suite and move away from engineering services that suddenly call into question revenue projections for 2021 and 2022. We have to consider the entire question around the validity of the orders and financial projections from Lordstown Motors (RIDE) .
Last night, we had to add Romeo Power (RMO) to that list in an almost Nikola (NKLA) like fashion. No, RMO isn't a fraud but the numbers it presented in November 2020 turned out to be as real as Harry Potter. The company lower projections of 2021 revenue of $140 million presented in November 2020 and again recently to a range of $18 million to $40 million for 2021. That range isn't a quarterly projection. That's the full year.
And we're supposed to believe 2022 will bring in $412 million while 2024 will reach $1.156 billion? If the company falls to the lower end of the 2021 range, it may achieve 100% growth. That sounds great unless you were projecting growth of almost 1200%. This type of stuff is borderline criminal, if not criminal.
Even Clever Leaves (CLVR) , a cannabis name with incredibly low cost of production for dried flower, declined to provide guidance because they couldn't do so without "unreasonable efforts." Are you kidding? On Monday, I worked through three conference calls with a fever near 101 and feeling like garbage because I committed to several projects. We watched healthcare professionals work round the clock, make me look like a wimp for my previous sentence, and perform at the highest levels in the most unreasonable of conditions but you're telling me you can't put some numbers on a spreadsheet, call your customers, or put in some effort?
There were some good things from their report like margin improvements, but growth isn't quite to the levels that it can overcome a gaffe like the statement above. It makes management appear like a rookie making mistakes in the big leagues.
Trading SPACs was fun for most of 2020. Now that the rigors of being a public company are in play, the reality of the situation has quickly taken hold. Not every dip should be bought nor any plummet. For companies' post-merger, I would likely wait to see how the first report plays out before taking positions. While I don't hate the concept of using the sub $10 pre-deal SPACs for a cash replacement, the sentiment continues to decline for the group seeing graduates fail over and over again that the upside beyond $10 continues to shrink.
The easy money is long gone. The need for a deeper understanding of management and a realistic view on whether a company can deliver on its projections or not is now the focus. For now, I'm taking a pretty big step away from the space. We still have plenty of opportunities elsewhere in the market.