According to information from the Environmental Protection Agency, a “typical passenger vehicle emits about 4.6 metric tons of carbon dioxide per year.” Every gallon of gasoline burned creates about 8,887 grams of carbon dioxide, creating massive problems at scale. Even more challenging, the U.S. population continues to grow through natural births and immigration, necessitating a practical solution. That means you may want to invest in an EV stock that can provide you with the exposure you need.
That’s where electric vehicle (EV) manufacturer REE Automotive and its recent initial public offering (IPO) come into the picture. Using a scalable skateboard platform, REE can potentially deliver zero emissions and consumer accessibility to the EV market.
When Did REE IPO?
REE IPO’d on July 23, 2021 at $4 per share. Check the IPO calendar for more information on new offerings and their expected debuts.
REE Automotive Financial History
Although the current personal transportation paradigm centers on the combustion engine, data from Meticulous Research suggests that a game-changing transition is over the horizon. By volume, industry experts project that the global EV market will expand to 233.9 million units by 2027, which represents a compound annual growth rate (CAGR) of 21.7% from 2020. Further, by the end of the forecasted period, the valuation of the EV sector could hit nearly $2.5 trillion, or a 33.6% CAGR from 2020.
Consumer sentiment drives much of this pivot. Thanks to Tesla (NASDAQ: TSLA) making EVs both functional and desirable, legacy automakers have caught on. Even performance-centric auto brands have caught the electric bug. More importantly, growing evidence of climate change and global warming forced everyone, from individuals to corporations to international governments, to recognize that modern societies must forward a workable solution. Naturally, EVs play a powerful role in sustainability.
As a result, REE Automotive organically draws interest by virtue of its critical underlying business. But the company also distinguishes itself through its integration of core systems and components — particularly steering, braking, suspension and powertrain control — into the inner wheel hub of its proprietary platform. Because of this configuration, the framework of REE EVs is completely flat — hence, a skateboard platform — facilitating a completely modular design.
For 2020, REE generated revenue of $388,000, which is low. Nevertheless, management anticipates that by fiscal year 2026, the EV maker will ring up $19.1 billion in sales. This estimate is believable in the sense that REE’s skateboard setup dramatically reduces costs. Additionally, the company can leverage the platform’s flexibility to accommodate corporate clients which may have specific transportation needs.
What separates REE stock from other market debuts, though, is that the underlying company went public via a reverse merger with a special purpose acquisition company (SPAC). Also known as blank-check firms because they have no operations of their own, SPACs exist solely to enter an IPO to ultimately combine with a private enterprise.
According to Reuters, on February 3, Israel-based REE Automotive announced that it agreed to merge with 10X Capital Venture Acquisition Corp. Both entities reported that the deal values the EV manufacturer at approximately $3.6 billion. On the news, 10X Capital shares popped up nearly 46% in premarket trading.
To be sure, SPACs generated much interest over the trailing year, with several headlines not necessarily shining a favorable light on the corporate vehicle. For instance, due to SPAC sponsors taking home a significant chunk of equity in the combined entity — typically 20% — a question exists as to whether sponsors are merely securing deals to get (well) compensated.
At the same time, SPACs allow private companies to access public markets when they might not be able to via a traditional IPO. And specific to REE stock, the intense interest for EVs suggests that the investing community will be more than happy to welcome another opportunity in this relevant sector.
As of May 2023, REE is trading just under 50 cents per share with a market cap just over $85 million.
REE Automotive Potential
One of the main reasons why you’re seeing multiple IPOs in the EV space is the lower barrier to entry. Thanks to requiring fewer moving parts, it’s much easier — all other things being equal — to produce an EV as opposed to a similarly featured combustion-engine car. However, REE enjoys an additional advantage to the competition because of its skateboard framework. This EV platform is unique in the industry, and while this technology company has done well to infiltrate the vehicle market, it is only part of the electrification of the North American car market.
As mentioned above, REE can craft electric transportation and work vehicles geared specifically for individual companies. In the prior “analog” paradigm, corporate entities had to adjust their operations to fit their vehicles. Now, it’s the opposite way around. Essentially, REE has transferred the video-on-demand concept from the consumer content market to the EV sector, revolutionizing commercial modularity and custom manufacturing.
Just as importantly, the skateboard platform enables management to respond quickly and effectively to shifting consumer behaviors. Because of REE vehicles’ flat base, the company can build whatever chassis type on top of it, such as a sedan, SUV or truck. In contrast, chassis-specific platforms don’t have the luxury of responding to broad-scale consumer pivots. Put another way, if management builds too many sedans and not enough SUVs, the adjustment wouldn’t be as catastrophic compared to a non-modular framework.
Nevertheless, one risk factor to be aware of is the present global semiconductor supply constraint. This production and availability crisis negatively impacted all automakers, resulting in massive price spikes for used cars. But arguably, the circumstance hurts EVs disproportionately because complex electric drivetrains require more semiconductor integration.
Overall, though, the pandemic and its economic shock should be a one-off event. Eventually, global supply chains will normalize, which will then put REE back on track to meet its $19 billion 2026 revenue target. If car sales increase and the firm remains a technology leader, it could become a darling of the stock market. However, only time will tell if the market value of the asset will hold. Even if the firm doesn’t overtake the gasoline car, it can easily grow as the EV market adds more automakers and gains more exposure (or certain states begin mandating the sale of EVs only.)
How to Buy REE Automotive (NASDAQ: REE) Stock
If you know how to buy stocks, you can jump in right away. If not, follow the steps below.
Step 1: Pick a brokerage.
When online brokerages first made their debut, clients tended to focus on trading costs and fees. But thanks to the proliferation of mobile investing apps, commission-free trading has become the norm. Now, you are free to choose among the best brokers for their convenience and functionality.
Step 2: Decide how many shares you want.
Much of trading involves risk management and your share count plays a crucial role. A higher count facilitates greater rewards should your target stock rise in value, but it also exposes you to greater risk. Therefore, choose a figure which you’ll be comfortable with.
Step 3: Choose your order type.
Before trading, make sure to understand these market concepts:
- Bid: The highest price a buyer will offer, the bid is always lower than the ask.
- Ask: The lowest price a seller will take, the ask is always higher than the bid.
- Spread: Signifying the bid-ask price difference, spreads also indicate market liquidity and risk. Tighter spreads reveal robust market negotiations, resulting in higher liquidity and lower risk. The opposite is true for wider spreads.
- Limit order: Limit orders are transaction requests at a specified rate. They offer pricing transparency but no execution guarantees.
- Market order: Conversely, market orders guarantee fulfillment at the prevailing rate via the least favorable terms (i.e., buy orders on the ask).
- Stop-loss order: Stop-loss orders automatically exit your position at either a predetermined price or any price lower than the requested rate.
- Stop-limit order: To eliminate automated exit ambiguities, stop-limit orders only sell out of your position at a predetermined rate. However, such orders have the same nonfulfillment risk as limit orders.
Step 4: Execute your trade.
To execute a market order, follow these steps:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence but with desired execution price for limit orders.
Driving Innovation in Personal Mobility
While Tesla made EVs fashionable to drive, REE stands to make it practical. According to government data, median household income in the U.S. was $68,703 in 2019. However, the cheapest Tesla vehicle, the Model 3, costs just under $40,000. Frankly, EV pricing needs to come down for the industry to become widely accessible.
Fortunately, REE Automotive’s scalable and cost-effective skateboard platform lessens cost structures, enabling broader EV integration. Therefore, this stock carries significant upside potential.