$DCRN - Merger with Tritium, a manufacturer of DC fast chargers for EVs

Archives
1

Preface

I want to emphasize that this is my first DD and I’ve been trading for less than, but almost, a year. Any constructive criticism is very much appreciated and proactively welcome! I just can’t stand being useless to this wonderful community any longer and want to do my own original DD and hope to make others money at least once :slight_smile:

What are DCRN and Tritian?

DCRN is the ticker for Class A common stock of Decarbonization Plus Acquisition Corporation II. This is different from DCRC, on which DD has been posted previously, but, indeed, they are two of the four blank-check companies under the umbrella of the Decarbonization Plus Acquisition Corporation. DCRC was listed on May 20th and has had a 37.99% run-up since then (33.20% since the DD was posted here previously), so hopefully, my play is similar in nature and makes people money. Decarbonization Plus Acquisition Corporation is comprised of four SPACs (DCRB, DCRN, DCRC and DCRD) and I’m looking at DCRN’s merger with Tritian now.

DCRN was listed on April 1st, and has since moved 7.07%. On May 26th, DCRN announced their proposed merger with Tritium (discussed below) and DCRN moved +1.35%

What’s Been Brewing?

On October 28th, Tritium won the “Chargepoint manufacturer of the year” award at the Electric Vehicle Innovation & Excellence (EVIE) awards.

On November 1st, DCRN announced that their form 425 (“Filing of certain prospectuses and communications in connection with business combination transactions”) has been filed. It stated that Tritium has sold over 5250 fast chargers and delivered over 3.6M fast charge sessions. Their revenue has grown 700% to a projected $84M in 2021. In the quarter ending in September, Tritium booked record orders of $55M. Tesla has ~30k fast chargers in the world, and with 5.25k chargers sold, Tritium seems to be growing quite fast, and their expected 2023 revenue is $359M.

On Friday, Nov 5th, a minute after market close, Citadel filed Form SC 13-G with the SEC reporting that they’ve acquired ~2M shares of DCRN, which is 5.01% of outstanding shares of stock. On this news, DCRN jumped 1.5% the following Monday. In fact, institutional ownership accounts for 88.06% of DCRN stock, of which Citadel is the largest owner, which is very bullish. Since this announcement, it seems that they’ve trimmed their position a bit, though; they now own 1.9M shares, or 4.81% of outstanding shares, but they’re still the largest institutional owner.

On Thursday, Nov 18th, they filed another Form 425 announcing a partnership with EVCS, one of the largest EV charging networks on the West Coast, to expand their network. They will be deploying over 400 new fast chargers. (A WSJ article says 500, but this form says 400, so I’m going to trust that one instead; EVCS already has 100 Tritium charges, so the total will be 500, though.) Upon this news, there was another 0.88% pop on Friday.

These all seem like rather small spikes relative to some of the other stuff we’ve seen; however, the post-merger valuation of Tritium is currently way over the market cap of DCRN, which I will discuss in the next section.

Valuation Compared to Other E-Mobility Equities

The ratio of enterprise value to expected 2023 revenue is 12.8x for EVgo, 9.6x for ChargePoint, 5.1x for Volta and only 3.3x for Tritium. Not sure what to make of this volatility-wise after the merger but Tritium’s Form 425 reports this at the end of the report as a positive thing, and says that this is a more attractive valuation for investors. This may be indicative of great future growth post-merger, but I’m not too clear on what to make of this. Nonetheless, even a 3.3x valuation ($1.2B) is much larger than DCRN’s current market cap of $518M, so I’m going to be watching this with great curiosity and may take a few positions on Monday.

Other Factors

Again, I’m new to this, so I’m not quite sure how to interpret this, but there’s rather low short interest in DCRN. To me, this (plus a large amount of institutional ownership) indicates that this is a fundamentals play, but as I said previously, even the fundamental post-merger valuation is double the current market cap of DCRN, so this play is very interesting to me.

If there are any factors I’ve overlooked or anything else anyone would like me to research, please let me know!

Edits

Edit 1 [Nov 21, 2021]:

Merger is expected to occur in either December 2021 or January 2022 as per their Form 425 filed a few days ago.

3 Likes
2

More News

Sorry, I didn’t realize an older edit of my post went through. There’s a bit more that I had dug up that I didn’t include in the original post.

Waiver of Acquisition Calls

Gilbarco Veeder-Root ($VNT) made a minority investment in Tritium in 2018, and has a call option right to acquire Tritium, which it waived on August 12th of this year. They had the following to say about it:

“Since making our minority investment in Tritium in 2018, we continue to believe it is important to evolve our business portfolio to address progressive customer needs in a market where a growing need for rapid charging is one of the top barriers to EV purchase. To this end, we support the agreement for Tritium to become a publicly listed company through a proposed business combination among Tritium, Tritium DCFC Limited and Decarbonization Plus Acquisition Corporation II, a special purpose acquisition company.”

Even though that’s bullish on face-value, I’d appreciate someone else’s insights on how to interpret this. I’m currently bullish on it, based on all aforementioned news and developments.

1 Like
3

The infrastructure and BBB legislation contains massive expansion to EV charging infrastructure. Their passage is helping this one out alot.

I’d take a long position in this similar to DCRC.

4

That’s what I’m thinking too. I’m curious on the lack of options for DCRN, given that it was listed before DCRC (thanks for your research on that!) which does have options. They do have warrants, so I may look into that for leverage but I’m not too certain when they qualify for options. I believe they do satisfy the volume, shareholder count and publicly-traded share count requirements, and are traded on the NASDAQ, but dunno about the “sufficiently high price” requirement.

5

The reason I chose DCRC over one like this is because I think they have a step change innovation. Charging is just a commodity. One with great growth potential for sure. But not going to turn an industry on its head.

6

That’s a fair point. I was most intrigued by the difference between the current market cap of DCRN and the post-merger valuation of Tritium which is more than twice the current market cap of DCRN. That’s quite a bit similar to DCRC’s situation, so I’m expecting similar movement.

2 Likes
7

Have seen some interesting things related to DCRN over the last couple of days.

This article grabbed my attention: https://www.reuters.com/markets/deals/blackrock-joins-e-car-charging-venture-ionity-788-mln-funding-round-2021-11-24/

Ionity own EV charging networks all across Europe and in their own words:

IONITY is a joint venture of BMW Group, Ford Motor Company, Hyundai Motor Group, Mercedes-Benz AG and Volkswagen Group with Audi and Porsche. Our goal is simple: Building a high power charging network for electric vehicles along major highways in Europe.

On top of all of these names, Blackrock have now invested $788m in IONITY.

Whose chargers make up the majority of the IONITY network across Europe? Tritium - i.e. the SPAC target of DCRN.

“The PK350, presently the company’s most powerful DC fast charger, makes up the majority of the IONITY network across Europe.” - Tritium Named “Chargepoint Manufacturer of the Year” | Tritium Tritium

As long as this relationship between Tritium and IONITY continues, you’d expect at least some of that 750m+ to be heading toward Tritium which will hopefully be positive news for DCRN.

As long as the news continues being positive for Tritium and the merger goes ahead, I think I’ll be in this one for the long haul as a long term hold.

1 Like
8

By random chance I was reading an article about how Ford’s new EV chargers look like Tesla rip-off’s. They mentioned how Ford has partnered with Electrify America and Ionity. I started kind of digging into those companies a little trying to find out if they or their parent companies were publicly traded, and ended up reading way too much about ev chargers, lol.

Anyhow, here’s the link to the article: https://electrek.co/2021/11/23/ford-installing-tesla-supercharger-lookalike-charging-stations/