Battery Future Acquisition

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Contributor, Benzinga
December 15, 2021
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Among one of the bright spots of the heavily contested 2020 presidential election was a largely universal recognition of the need for an energy industry rethink. Even those who don’t share the full vibrancy of the burgeoning environmental, social and governance (ESG) initiative still appreciate the geopolitical implications behind fossil-fuel dependency.

Adding urgency to the issue, the Biden administration since taking over the helm prioritized environmental concerns, paving a pathway for the U.S. economy to generate net-zero emissions by 2050. Recently, though, the president directed “federal agencies to make all of their vehicle purchases zero-emission units by 2035.”

Logically, this decree bodes well for electric vehicle (EV) manufacturers and companies involved in the EV battery supply chain. While alternative-powered vehicles no longer represent novelty acts, pricing remains a major concern to green viability on the nation’s roads. According to the Pew Research Center, just “7% of U.S. adults say they currently own an electric or hybrid vehicle.”

When Did Battery Future Acquisition IPO?

Entering the public arena during an emotionally heightened frenzy has its set of pros and cons. Mainly, investors must be aware that no matter what company on the IPO calendar they’re interested in, 2021 has been a record year for new listings. According to Ernst & Young, the number of IPOs increased 64% year-over-year to 2,388.

What’s more, investors still have half a month remaining until they ring in the new year.

Battery Future Acquisition made its public market debut on Dec. 15. Under the terms of the deal, Battery Future distributed 30 million shares at a per-unit price of $10. Each unit consists of one common stock and one-half of a warrant, with an exercise price of $11.50.

Shares are listed on the New York Stock Exchange under the ticker symbol BFACU. Cantor Fitzgerald represented the sole bookrunner.

As you know, the competition between EV industry leader Tesla Inc. (NASDAQ: TSLA) and rising upstart Lucid Group Inc. (NASDAQ: LCID) combusted into a raging inferno. But attempting to decipher the winner in the EV space — especially with new and legacy competitors knocking on the door — a decade down the line may be impossible. But they all need access to the same lithium-ion battery.

While levered to an extraordinarily relevant industry, Battery Future Acquisition is a special purpose acquisition company (SPAC). Unfortunately, many SPACs have not lived up to their billing, mostly due to the dilutive nature of this investment vehicle.

It’s also worth noting that EV-related SPACs have encountered distinct challenges following their business combinations. Although it’s unfair to impugn one SPAC for the actions of another, due diligence in this space is an absolute priority.

Battery Future Acquisition Financial History

One of the unique features of a SPAC is that it has no underlying operations. Instead, it’s a blank-check firm or shell company. Therefore, rather than expanding a pre-existing business, a SPAC will launch an IPO to raise money to help secure a merger with a legitimate private enterprise.

Usually, SPACs have two years to identify and complete a business combination with a hopefully viable organization. The core benefit to the participating retail investor is that she or he can participate in a ground-floor opportunity, similar to a private-equity raise for accredited investors. However, no one knows what company a SPAC will merge with — at least, no one is supposed to know — presenting a risk in incurring an opportunity cost.

However, don’t get the impression that you will be ordering BFACU stock completely blind. According to Battery Future’s amended prospectus, management will focus on “industries spearheading the shift from fossil fuels to electrification, including companies in the battery value chain from the mine site to end user to after-life battery and component recycling.”

Furthermore, its core strategy will “focus on critical battery materials companies required for the energy transition (lithium, nickel, cobalt, copper, graphite, manganese and the rare earth elements), their related midstream processing operations, along with battery and component manufacturers.” Management states that the “demand for these critical battery materials and the products they underpin are expected to increase significantly” — and the executives are not mistaken.

First, transitioning private vehicles to cleaner or zero emissions will take on greater importance for both governmental and corporate sources, due largely to shifting societal opinions on climate change. According to the Environmental Protection Agency, a “typical passenger vehicle emits about 4.6 metric tons of carbon dioxide per year.” Replacing these emitters with EVs will go a long way to securing environmental justice.

Cynically, such widescale initiatives require batteries, thus bolstering the narrative for BFACU stock.

Second, the market for EVs alone is massive. According to data from Deloitte Insights, its researchers expect the segment to accelerate at a compound annual growth rate (CAGR) of 29% over the next 10 years with “total EV sales growing from 2.5 million in 2020 to 11.2 million in 2025, then reaching 31.1 million by 2030. EVs would secure approximately 32 per cent of the total market share for new car sales.”

Battery Future Acquisition Potential

Although EVs dominate the discussion surrounding advanced battery technologies, that’s not the only sector that benefits. Lithium-ion-based power sources undergird mobile devices, medical equipment and power tools. Also, when combined with renewable energy platforms like wind and solar, lithium batteries impose a lower net carbon footprint.

Interestingly, while a common assumption exists that you can’t have your ESG cake and eat it too, an analysis from Harvard Law School begs to differ. It notes that environmentally and socially conscious firms tend to have higher returns with lower risk.

Nevertheless, you will want to be cautious with BFACU stock. First and foremost, a SPAC is not obligated to focus on its stated intention, although it’s in its best interest to do so. Second and more critically, controversies highlight the hypocrisy risk of ESG-friendly firms.

For example, conflict-and-corruption-torn Congo supplies most of the world’s cobalt, which helps western nations achieve their emissions targets while imposing a grim human cost on the most vulnerable, per an investigation from The Washington Post.

Again, due diligence is a must, especially if you genuinely care about holistic ESG.

How to Buy Battery Future Acquisition (BFACU) Stock

With BFACU making its debut, interested investors must acquire shares at the open, requiring you to know how to buy stocks. For a refresher, follow the steps below.

Step 1: Pick a brokerage.

Before you can trade, you must open an account with a brokerage. Since most compete on similar financial incentives, narrow your best brokers to companies that fit your needs.

Step 2: Decide how many shares you want.

IPOs are risky, and SPACs increase the danger to your portfolio. Therefore, choose a balanced share count.

Step 3: Choose your order type.

Before trading, learn these market concepts.

  • Bid: The buyer’s best offer for a stock.
  • Ask: The seller’s lowest acceptable price.
  • Spread: The difference between the bid-ask price, the spread indicates market risk as this is also the profit margin for market makers.
  • Limit order: Buy or sell requests at a predetermined price, limit orders provide transparency but no execution guarantees.
  • Market order: Market orders guarantee fulfillment but only at the current rate.
  • Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or anything lower.
  • Stop-limit order: Stop-limit orders only leave positions at a specified price, but they also carry non-fulfillment risks.

Step 4: Execute your trade.

Follow these steps to execute a market order:

  1. Select your action type (buy or sell).
  2. Enter the shares you want to acquire (or sell).
  3. Hit the Buy (or Sell) button.

Follow the same sequence for limit orders (but include your execution price).