Description
A good friend of mine (and a contributor to this site) always likes to keep his write-ups "simple". I will endeavor to do the same here, especially since it is the last week of the year and folks have family and other matters to attend to.
Twin Vee Powercats (Nasdaq: VEEE) is a boat manufacturer based in Fort Pierce, FL.
They have been building boats for over 25 years.
The "TwinVee" name is well known amongst boat enthusiasts and their products are commercially used by the US Navy Seals and Florida Fish and Wildlife Commission.
The Company has 10 models ranging in size from 24 feet to 36 feet including (4) GFX models and (6) Classic models with two new models that will launch by year end. These are all gas powered boats.
There are 6 Electric Model boats in development ranging in size from 18 feet to 28 feet and an Electric Outboard Motor company (Electra) currently in the prototype and testing phase.
The Company IPO'd this summer at $6.00 per share, raising $18m.
The CEO owns almost half of the stock.
Excluding warrants, which are out of the money, there are 7m shares outstanding at around $3.80 per share for a market cap of $26.6m
At the end of Sept 2021, the company reported cash and investments of $12m, putting the EV at a mere $14m.
The run rate sales are somewhere in the $15-$20m range and the company breaks even - which is pretty remarkable since this level of sales seems far from scale. People I have spoken to in the industry think that their distribution footprint (10 dealers and 14 locations) could be much better. Revenue in the second quarter was up 92% year on year and 48% year on year for the first six months. Revenue in Q3 was up 65% year on year and they sold 33% more boats than Q3 of last year.
At the current price you are not paying much for this business considering half of the market cap is in working capital...
**The plot thickens**
On Thurs, Dec 23rd 2021, while most market participants were preparing for Xmas, Forza X1, a fully electric boat developer filed on with the SEC to raise up to $29 million in an initial public offering. Forza is being "spun out" of Twin Vee PowerCats.
The company states that it aims to be among the first to develop and manufacture fully electric, affordable boats with mass appeal. Forza X1 is focused on the creation and implementation of marine electric vehicle ("EV") technology to control and power its electric boats utilizing a proprietary outboard electric motor. It believes to be one the first companies to design a fully integrated electric boat including the hull, outboard motor and control system for mass production. To date, Forza has designed and manufactured only prototypes of its electric sport boat, has not yet commercialized its boats, and has not sold any boats.
Here is a link to the S-1:
https://www.sec.gov/Archives/edgar/data/0001901305/000173112221002193/e3375_s-1.htm
If you go through the file above it looks like VEEE will retain 48% of this company.
FRZA will use the proceeds to construct a 100k sq ft facility in FL that will cost around $11m
Keep in mind that if the FRZA deal does get done, VEEE's opex should go down as it has been funding FRZA.
VEEE has not issued a Press Release on this transaction yet - perhaps they have to wait for the S-1 to go effective.
The only other 'pure play' electric boat maker in microcap land is Vision Marine (VMAR) which loses a fortune on less than $1m sales/quarter and has no brands. Somehow the market values VMAR at $42m, or around $20m if you back out the cash.
If Forza raises $29m and VEEE retains 48%, VEEE's stake in FRZA could be worth the entire VEEE market cap. It seems like a good bet that FRZA does get done and that VEEE's current EV goes negative at the current price of just under $4. Regardless of what FRZA ends up being worth, you get 48% of FRZA in addition to all of VEEE for less than the cost of one used $11m yacht :)
Risks:
VEEE's numbers inflated by 'stay at home Covid' boating - I would take the other side of this. For FIVE consecutive years, FL ranks in the number one spot for net migration among US states.
You have to like the CEO here - he owns a ton. I've spoken to him and think that his interests are aligned.
VEEE fails to increase distribution - recession / gas prices kill demand in their legacy lines
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.
Catalyst
FRZA spin gets done
VEEE PR's the spin and their pro forma ownership stake in FRZA