Is Forza X1 Inc IPO a Good Investment?

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Contributor, Benzinga
August 4, 2022
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Key Takeaways:

  • While the electrification of transportation is a top priority, roadgoing vehicles dominate the narrative as opposed to boats and ships.
  • Forza X1 Inc hopes to change this framework, focusing on electric-powered boats that are quieter and cleaner than their combustion-powered counterparts.
  • Although Forza X1 enjoys substantially positive implications for addressing climate change, economic matters may pose obstacles to its upcoming new listing.

Though personal mobility represents one of the foundational catalysts for the modern global economy, the freedoms that people enjoy come at a great cost to the planet. While the mainstream media tends to focus on roadway-based pollution and the solutions that electric vehicles (EVs) provide, relatively few have shined a spotlight on the electrification of the high seas. However, Forza X1 Inc might shift this paradigm.

Specializing in the creation, implementation and sale of electric-powered boats, Forza X1 is reimagining how people interact with their maritime surroundings. Almost whisper quiet by comparison, electric boats present a far more palatable platform than traditional boats with their loud motors and noxious emissions. Most importantly, as societies across the world take stock of the impact of long-term environmental damage, electric boats could present a viable alternative.

While boating represents an important cog in the recreational industry, the practice presents significant ecological costs. According to data compiled by Statista.com, greenhouse gas emissions from ships and boats in the U.S. amounted to 32.3 million metric tons of carbon dioxide equivalent (MtCO2e) in 2020. While down 31% from 1990 levels, it’s still a high figure considering the unprecedented reduction in activity from the pandemic that year.

In other words, as communities normalize and reengage with their pre-pandemic activities, addressing waterway emissions will likely become a rising priority. Possibly, Forza X1 may provide a workable solution, though economic considerations will likely present headwinds to its upcoming initial public offering (IPO) — the first time a private enterprise releases its equity shares for retail (public) investors.

Below are the pros and cons to consider.

What Does Forza X1 Do?

According to its Form S-1 disclosure filed with the U.S. Securities and Exchange Commission (SEC), Forza X1 is a designer and manufacturer of electric-powered boats. The company uses its EV technology “to control and power our boats and proprietary outboard electric motor.” Further, management states that its “electric boats are being designed as fully integrated electric boats including the hull, outboard motor and control system.”

Per the prospectus for its upcoming new public market listing, Forza main mission statement “is to inspire the adoption of sustainable recreational boating by producing stylish electric sport boats.” It describes the three main components of its electric boats as “(1) the fiberglass part of the boat, (2) the motor that propels the boat and (3) the control system.”

In terms of operational progress, Forza notes that it has “completed the design of two electric boat models and has begun tooling the molds which are required to build the physical fiberglass boat. To date, we have completed the design and prototyping of the electric outboard motor that will be used as the initial propulsion source for our two models. We have also completed the design and prototyping and have begun testing the boats’ integrated control system.”

As well, Forza has “entered into a supply agreement for the supply of the lithium battery packs that we plan to use to power the electric boats. We expect to begin production of our two FX1 electric boats and commence selling to end user customers by the second quarter of 2023.”

Interestingly, the company declared its main aspiration on the S-1 disclosure. “We believe that the boating industry will follow in the footsteps of the electrification of the automotive industry by creating electric boats that meet or exceed the traditional boating consumer’s expectations of price, value and run times. In other words, electric boats must offer a similar experience when compared to traditional gas-powered boats in terms of size, capability and price point.”

When is the Forza X1 IPO Date?

Barring any unusual circumstances, Forza X1 will ink its name on the IPO calendar on Aug. 11, 2022. Shares will trade on the Nasdaq exchange under the ticker symbol FRZA. ThinkEquity represents the sole bookrunner for the deal.

Under the terms of this IPO, Forza will attempt to raise $15 million through the distribution of 3 million shares at $5 each. At the proposed price level, the Fort Pierce, Florida-based company — which is being spun out of Twin Vee Powercats Co. (NASDAQ: VEEE) — will command a market value of $50 million.

Right from the get-go, prospective IPO participants must be careful about this opportunity. While the headlining narrative is appealing — that of facilitating a cleaner platform for America’s waterways — Forza is a nano-capitalization debut. Indeed, some organizations that track broader IPO performances ignore companies with a market cap lower than $50 million.

In addition, Forza represents an aspirational public market debut. While the company has successfully designed and manufactured prototypes of its electric sport boats, it has not yet commercialized its boats nor has it sold any. Of course, the upshot on the other side of the risk-reward spectrum is that if Forza progresses satisfactorily, FRZA stock could skyrocket.

Another factor to consider when conducting due diligence on this IPO is Forza’s total addressable market. According to the National Marine Manufacturers Association, 35.7% of the U.S. adult population (or 87.3 million Americans) participated in recreational boating at least once in 2014.

Further, UC Davis Health reported back in July 2020 that COVID fatigue — the pressures that pandemic-related mitigation protocols imposed on mental health — was taking its toll on the U.S. population. Therefore, the pent-up demand that catalyzed a surge in retail spending and vacation taking may boost interest in Forza’s electric boats.

Still, the company has to make good on its production goals, and consumers must be willing to open their wallets, a factor that is largely dependent on broader economic conditions.

What Analysts Are Saying About Forza X1 IPO

Because Forza X1 is a nano-cap IPO, very few if any analysts have weighed in on the opportunity. Still, the company has been making waves in the local news scenes where its business may present a positive impact.

According to North Carolina’s The Center Square, residents of the Tar Heel State will subsidize Forza X1’s new plant in McDowell County by more than $1 million. Governor Roy Cooper touted his state’s latest development deal that will award Forza $1.37 million over the next 12 years in exchange for locating a new manufacturing facility in Marion, a city in McDowell County.

"The strong momentum for our emphasis on the clean energy economy is putting money in the pockets of everyday North Carolinians in both urban and rural areas like McDowell County," Cooper said. "While the number of electric cars is rapidly expanding, so will electric boats made by Forza X1 right here in our state."

Further, Forza’s facility “is expected to create 170 jobs with an average annual salary of $51,047, or a little over $10,000 more than the average wage in the county.”

However, Mitch Kokai, senior policy analyst for the John Locke Foundation, was not particularly thrilled at the above announcement.

"Gov. Cooper’s latest announcement offers a textbook example of state government using its targeted incentives policies to pick economic winners and losers," he said. "If the Forza X1 project is an economically viable option, it shouldn’t need incentives to move forward.”

Indeed, this latter point will likely be a contentious one for FRZA stock. The underlying company has not yet commercialized its electric boats, which have an estimated starting price of around $150,000. Thus, the main criticism is that North Carolinians will be essentially subsidizing hopes and dreams rather than a proven business model.

Forza X1 Financial History

At this juncture, Forza X1 is operationally an aspirational entity. For the period between Oct. 15 through Dec. 31, 2021, the company generated zero sales while racking up $263,349 in operating expenses. This translated to a net loss of $270,630.

On the balance sheet, the company is sitting on total assets worth $2.23 million, which includes $1.8 million in cash and equivalents. Total liabilities amounted to $690,378.

Forza X1 Potential

Despite its challenges, Forza X1 commands significant potential if it can reach its operational goals. For instance, the federal government has designated about 26% of U.S. waterways as marine protected areas. However, some jurisdictions grant exceptions to electric-powered boats.

On the other hand, the declining purchasing power of the dollar is problematic. In all of 2021, currency erosion amounted to 6 cents on the dollar. In the first half of this year, the erosion is equivalent to 5.3 cents, meaning that inflation has picked up double time, thus reducing the incentive for unnecessary purchases.

Where to Buy Forza X1 IPO Stock

If you want to participate in Forza X1’’s IPO, you’ll need to know how to buy stocks. But before you take that step, you must sign up for a brokerage account. Below is a list of best brokers to consider.

FRZA Stock 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.

FRZA Pre-IPO

Those seeking pre-IPO opportunities in FRZA stock (that is, acquiring shares at their initial offering price as opposed to whatever the open market decides) can do so through opening an account with ClickIPO.

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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.