ArcLight Leaving the Station

Last week special acquisition vehicle ArcLight Clean Transition (ACTC:  Nasdaq) tied the knot with Proterra, the electric bus manufacturer.  In September 2020, ArcLight sold 27.8 million common stock and warrant units at $10.00 per unit.  The shares did not begin trading separately until November and then flew to the skies with the news of the Proterra deal. 

Investors are aflutter over Proterra’s position in the electric vehicle market.  Based on Colorado, Proterra designs and manufactures buses and electric charging systems for use in public and private transportation systems.  It has taken more than a decade, now the company has sold bus number 1,000 in 2020.  The company ended the year with 120 customers in North America, giving the company the largest market share on the continent.

 

Faster growth may be ahead for Proterra. Its most recently introduced bus model, the Proterra ZX5, is capable of traveling more than 300 miles on a single charge.  The model has the longest range of any of the 40-foot electric buses on the market.  If economy is not enough to attract customers, the Proterra ZX5 can accelerate from zero to twenty miles per hour in just six second.  Practically, a sport car of buses!

Proterra reports $181.3 million in total sales in the year 2019.  When the newly public company reports financial results for the year 2020, it may very well deliver news of strong growth.  However, traders should not get too excited.  The coronavirus situation appears to have cut into sales activity and perhaps the pace of demand.  Revenue in the first nine months of 2020, were $142.8 million, just over $141.6 million in sales in the same period of the previous year.  With $750 million in orders and backlog, Proterra promises to experience in a ramp in sales in the coming quarters. 

The company squeezes out a very small gross profit.  Unfortunately, the profit is miniscule in comparison to investments in research and development as well as some ambitious spending for marketing and selling projects.  Consequently, Proterra incurred an operating loss of $99.7 million in the full year 2019 and has already recorded an operating loss of $66.9 million in the first nine months of 2020.  The situation with cash flows of operations is not much a better picture, as Proterra used $97.2 million in cash resources in 2019 and another $59.6 million in the first nine months of 2020. 

Good thing then that ArcLight has plenty of cash to keep Proterra afloat  -  $1.98 billion at the end of September 2020.  The deal values Proterra at $1.6 billion when it is closed sometime in the next couple of months.  After all the bills are paid the new Proterra should still have over $800 million left over for working and investment capital.   The shares will trade under the symbol of PTRA.               

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.