What Is An ESG SPAC?

Northern Genesis has a series of climate solutions infrastructure special purpose acquisition corporations (SPACs). 

Its previous stock tickers (NGA & NGAB) already found acquisition targets, but it still has one more registered SPAC sitting on the shelf (NGC). Determining its fate requires some research into what it did with previous mergers.

Here’s a breakdown of Northern Genesis Acquisition Corp and its track record bringing companies public via SPAC mergers.

Northern Genesis Is A SPAC Play On ESG

Northern Genesis Acquisition Corp was founded in 2020 by Vice Chair Ian Robertson and Chair Chris Jarratt. Robertson co-founded APCI and served as a long-time CEO for Algonquin Power and Utilities Corp. Jarratt was previously on the board of an Algonquin affiliate company.

They seek underinvested companies that are over-leveraged and missing key managerial roles. Specifically, they focus on high-impact climate solutions that aim to provide high rates of return. 

They hone in on companies that rank well for environmental, social, and governance (ESG) factors. ESG was a $44.9 trillion industry in 2018 according to the company’s website.

So far, the team has effected reverse mergers with two companies – Northern Genesis I (NGA) became Lion Electric (NYSE:LEV) and Northern Genesis II (NGAB) became Embark (NASDAQ:EMBK).

Let’s dive into how each company performed pre- and post-merger to determine if NG is succeeding in its mission.

Lion Electric SPAC Merger

Lion Electric merged with Northern Genesis Acquisition Corp I in May 2021. The company is a leading manufacturer of all-electric medium- and heavy-duty urban vehicles like semitrucks and buses. Based in Quebec, Canada, the company is quickly approaching production models of its Lion6 and Lion8 electric trucks.

Until it has a production model ready, investors fear it may end up like other high-profile electric vehicle flops like Lordstown Motors (NASDAQ:RIDE).

The company went public through a SPAC with a lot of buzz in the 2020 holiday season. The hype faded, however, when it lost out on a crucial government contract.

Although Lion Electric doesn’t have the same problems plaguing Lordstown, it did lose an important school bus order earlier this year to Blue Bird of Pittsburgh because it couldn’t fulfill a five-bus order worth nearly $2 million.

Of course, the company’s partnership with Bolt Logistics and IKEA Canada proves it can get working vehicles on the road. It still has a long journey to reach the notoriety and production scale of Tesla (NASDAQ:TSLA) so risk remains high.

Embark Trucks SPAC Merger

Barely six months after closing the deal with Lion Electric, Northern Genesis Acquisition Corp II merged with Embark Trucks to bring it public.

Embark is an autonomous truck software platform that hopes to build an automated shipping and carrier network. It has major partnerships, including Werner, Knight, DHL, ABinBev, and HP. As an aside, the CEO was still in his 20s when making the $5.2 billion deal.

It also has the backing of major VC firms like Sequoia Capital and Tiger Global. The company’s stated goal is to make the trucking industry safer and more efficient by optimizing routes through a series of transfer points located in major cities around the country. This would shorten drives and make life easier for truckers who would still be behind the wheel of the autonomous vehicles.

A potential synergy exists between Embark and Lion Electric. Still, neither company is living up to its market potential. Embark is valued at “just” $2 billion on the public market. So, what’s next on the horizon, and should investors care?

Is NGC Stock a Good Buy?

Northern Genesis III is the third blank-check company started by the firm to support its ongoing ESG efforts. There’s still no word on what it may decide to merge with, but history provides a signpost as to what type of company it will target next. 

Both of its previous acquisitions are well known and have a lot of potential upside. Considering the market is beating them up, they may be attractive value plays over the next decade. The electric vehicle market is estimated to be valued at over $800 billion by 2028, and autonomous vehicles are forecast at a 31.1 percent CAGR to reach over $11 billion in that same timeframe.

There could be a big win in store for early investors but these stocks are inherently risky plays on disruptive technologies. If you want to hedge your bet, investing in all three of these gives you exposure to each angle Northern Genesis is playing, so you could perhaps reap the benefits of both hardware and software initiatives in this growing industry.

NGC Stock Forecast: The Bottom Line

Northern Genesis Acquisition Corp has three blank-check companies aimed at effecting mergers with ESG-focused companies.

Its first two acquisitions are arguably great value investments for the long term, although they’ve both been beaten down by the market since their public debuts. In the short term they could remain volatile and unappealing for those who are risk averse.

Embark or Lion Electric are, at this stage, better deals than the third blank-check corp, judging by their respective performances. Both dropped under their initial prices, so you can buy them at a discount today compared to their initial release. Arguably that makes them the more conservative investment options because if history repeats, investors who buy the next merger upon its public debut could suffer a big drawdown in the months thereafter. Indeed, research has shown a full 77% of SPACs trade under water within 6 months of their public market debut.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.