Is Clean Earth Acquisitions IPO a Good Buy?

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Contributor, Benzinga
March 1, 2022

Invariably, any discussion regarding the worsening rate of climate change necessarily focuses on the human cost of this deteriorating paradigm shift. Because of rising global temperatures and unusual dynamics such as water cycle intensification, plausible deniability is no longer a readymade counterargument. More critically, the issue presents a severe longer-term trajectory; namely, if government agencies fail to act, future generations will likely suffer devastating consequences.

However, the recent Russian invasion into Ukraine — an action that attracted widespread international condemnation for destabilizing the modern global order — strongly affirms that addressing climate change is not exclusively a matter of achieving environmental equilibrium. Rather, a broad reliance on fossil fuels drives geopolitical dependencies — dependencies that are often tied to nations that feature policies incongruent to commonly accepted principles.

Therefore, while new listings focused on renewable energy solutions such as Clean Earth Acquisitions Corp. have long been relevant, investors will soon be waking up to a harsh reality check regarding the consequences of fossil-fuel-dominated energy programs. While such an abrupt pivot could benefit Clean Earth, prospective buyers must be sure to conduct extensive due diligence.

What Does Clean Earth Do?

As a special purpose acquisition company (SPAC), Clean Earth Acquisitions does not feature underlying operations of its own. Instead, its sole purpose is to launch an initial public offering (IPO) — the first time a private enterprise distributes its equity shares to retail investors — to raise funds to support an eventual merger. If one is found within the specified timeframe, the SPAC will combine with the target enterprise, becoming one entity.

As you might surmise from its name, Clean Earth targets a private firm within the clean and renewable energy industry. Unlike other SPACs, though, management provided important clues that will narrow down a list of possible choices for a future business combination.

  • Profitability through purpose: Clean Earth’s main goal is to “identify and pursue businesses that participate in the global energy transition ecosystem that are facilitating the way that energy is produced, stored, transmitted, distributed and consumed, all while reducing or mitigating greenhouse gas emissions.”
  • Global focus: The blank-check firm will not limit its search for a merger within a specific geographical location.
  • Striving for quality: According to the company’s IPO prospectus, it aims to “acquire high-quality businesses that can generate attractive, risk-adjusted returns for stockholders.”
  • Finances matter: Per management’s disclosure, the SPAC does “not intend to acquire early-stage start-up companies, companies with speculative business plans or companies that are excessively leveraged.”

With a cogent description of its intentions, it’s possible that Clean Earth could help mitigate a portion of the reputational damage that some high-profile SPACs have inflicted on retail investors over roughly the trailing two years. Nevertheless, interested buyers must maintain vigilance with this and any other investment category.

When is the Clean Earth IPO Date?

Amid a very trying time in world politics, Clean Earth made its debut on the IPO calendar on Feb. 24, 2022. Shares of the SPAC will trade on the Nasdaq exchange under the ticker symbol CLINU. Originally, Clean Earth filed its intention to go public with the U.S. Securities and Exchange Commission (SEC) on Oct. 27, 2021.

Under the terms of the deal, the Bee Cave, Texas-based shell company intends to raise $200 million through the distribution of 20 million units at $10 each — the typical initial offering price for a SPAC. Each unit consists of one share of common stock and one-half of a warrant, which is exercisable at $11.50.

Based on these figures, CLINU stock will command a market valuation of $258 million. Financial powerhouse Citigroup Inc. (NYSE: C) acts as the sole bookrunner for the IPO.

Though an intriguing concept because of current events unfolding minute by minute, Clean Earth’s public market debut also presents significant risks. Therefore, interested buyers of CLINU stock must perform a cost-benefit analysis as part of their overall due diligence.

On the optimistic side of the spectrum, Clean Earth’s focus on the clean and renewable energy ecosystem is extraordinarily valuable, not just for U.S.-based interests but also for free democratic societies. Undeniably, one of the indirect catalysts that sparked the fresh conflict in Ukraine is Europe’s dependency on Russia for energy. Had Europe enjoyed alternatives, it could at the very least impose more diplomatic and economic pressure on the Kremlin.

Indeed, as the Associated Press notes, the geopolitical flashpoint has jolted Europe to push for secure energy supplies. Even before armed conflict occurred, Russia sold less gas than normal to Europe late last year, highlighting how a relatively small misunderstanding — let alone outright hostilities — could impose sharp economic costs.

However, finding other sources of fossil fuels might not be the answer since that would contradict an international push to address climate change. Therefore, increased investments into clean and renewable energy sources appear one of the few viable solutions, which theoretically bodes well for CLINU stock.

On the other end, as the Brookings Institution rightfully pointed out, fossil fuels are incredibly difficult to quit. While political, societal and cultural factors add to this harsh narrative, the overriding factor is scientific: carbon-based fuels are energy dense, thus providing a net cost efficiency that is challenging to usurp.

Finally, while the Ukraine-Russia flashpoint is a powerful reminder of how renewable energy sources can help wean nations off disadvantageous relationships from a security standpoint, it’s certainly a double-edged sword for CLINU stock and similar investments. The lack of respect for the rule of law may usher in profound global destabilization, which ultimately does no country any good.

What Analysts are Saying About Clean Earth IPO

As a pre-merger-announcement SPAC, it’s difficult for any analyst to comment on Clean Earth’s upside viability. Though shell companies typically abide by their disclosed frameworks regarding enterprise targets, it’s not a guarantee that they will follow through precisely, if at all. Thus, opinions may pour in after Clean Earth has identified a clear merger target.

However, the broader implications associated with CLINU stock has brought out intriguing insights that you may want to consider in your personal research. Most notably, CNN contributor Paul Hockenos recently wrote an op-ed arguing that Germany’s decision to suspend the controversial Nord Stream 2 gas pipeline that connected it to Russia may be a blessing in disguise.

Almost as if he was thinking about Clean Earth, Hockenos stated, “Europe may rely on Russia for around 35% of its natural gas — Germany over 50% — but there are green alternatives that can step in and at the same time serve the purpose of addressing the ever more urgent climate crisis.”

In other words, Germany and Europe could achieve through clean and renewable energy investments a reduction in unfavorable geopolitical dependencies and a major win for environmental, social and governance (ESG) initiatives. While such wide-ranging goals were already on the radar, the invasion of Ukraine may further solidify a commitment to next-generation energy solutions.

Of course, no one path features a consequence-free route. While the idea of pivoting to green energy infrastructure is appealing, this action may also lead to dependencies. According to the U.S. Geological Survey, “Batteries play an important supporting role for renewable energy sources like wind and solar, allowing excess power to be stored for usage when direct solar or wind power are unavailable.”

But what constitutes batteries? They include commodities such as cobalt, graphite, lithium and manganese, with each component constituting a magnitude of U.S. dependency on foreign sources of at least more than 50%.

Clean Earth Financial History

As a SPAC, Clean Earth does not feature any financial history other than the amount it raises for its IPO. However, the prospect of a future business combination in the clean and renewable energy ecosystem is, all other things being equal, extraordinarily bright.

According to analysts at Allied Market Research, the global renewable energy market commanded a valuation of $881.7 billion in 2020. By 2030, experts project that the sector could hit $1.98 trillion by 2030.

Clean Earth Potential

With the world waking up to Russia’s invasion of Ukraine — which the secretary general of the North Atlantic Treaty Organization (NATO) labeled “reckless and unprovoked” — the case for renewable energy infrastructure couldn’t be more pressing. Yes, addressing climate change is the long-term goal. However, the new order of diplomacy where military might trumps dialogue necessitates a serious commitment to energy security and independence.

However, this sharp realization might not translate to an immediate benefit to CLINU stock. For instance, graphite is a critical component of the battery systems needed to make renewable energy infrastructure truly viable. But the issue is that China — a country which the global community also has fraying relations with — dominates graphite production.

Thus, western powers could find themselves choosing the least worst option rather than a holistically productive one.

Where to Buy Clean Earth IPO Stock

Interested buyers of CLINU must acquire shares at the open, which necessitates knowing how to buy stocks. As well, investors should consider the list of best brokers below to find out which platform ideally suits their needs.

Clean Earth Restrictions for Retail Investors

Review the Financial Industry Regulatory Authority (FINRA) rules on restricted persons before participating in an IPO. Don’t engage if you have privileged information.

Clean Earth Pre-IPO

Unfortunately, no pre-IPO opportunity is available for CLINU stock.

About Joshua Enomoto

His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.