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Pure Climate Stocks IPOs to watch in 2022
Investing in green stocks can be a high-risk/high-reward proposition. Investing in green IPOs can be even trickier. Projecting a company’s performance in a rapidly evolving sector adds an extra degree of uncertainty that can be partially overcome by rigorous analysis.
With that in mind, which green IPOs performed well last year? Which ones disappointed investors? And how is the market for green stock market debuts? We’ll answer each of those questions in turn. But first, let’s take a closer look at the green IPO space itself.
Green IPOs: what opportunities do they hold for retail investors?
When a private company offers equity shares to the general public in a regulated stock exchange, it announces an initial public offering, or IPO. This is a formal declaration, typically subject to a host of special rules, some of which ensure that retail investors have an opportunity to review thorough documentation of the issuing company before shares become available.
For our purposes, green IPOs are undertaken by companies that place special importance on environmental sustainability, typically by developing environmentally friendly technology or products. The market for green technology is growing rapidly, and well-executed IPOs can perform especially well in the green-tech space.
Tesla, for example, debuted in 2010 and has since risen 24,389% to a recent high of $1,170 per share, outpacing every other listing in the S&P 500. A $10,000 stake in Tesla shortly after its IPO would be worth $2.1 million today. Tesla might be the most famous green IPO success story, but it is not alone. Solaredge Technologies, for example, has risen 1,426% since its IPO.
Investing is risky, and IPOs are just a bit riskier—the green space has its share of disappointments, just like any other field. Shares of Nordex, a wind turbine manufacturer, for example, have fallen 78% since the company went public. Array Technologies, second largest solar tracker manufacturer worldwide, has seen its share price fall by more than half in less than four years since its 2018 IPO.
With solid research and a healthy appreciation for risk mitigation, retail investors can realize gains that overcome their losses. After all, the very worst-case scenario would see an investor losing 100% of their position (and typically earn some tax benefits as a consolation prize once those losses are realized). With some IPOs generating gains of 1,000% and more, a single good investment can outweigh several disappointing ones.
The green investment space is especially rich in such high-upside opportunities, giving retail investors plenty of reason to pay close attention to green IPOs in 2022. The following analysis focuses on Pure Climate Stocks, a well-defined subset of the sometimes ambiguous green investment space. Pure Climate Stocks generate 100% of their revenue from activities that directly contribute to a healthier, cooler global climate.
How did Pure Climate IPOs perform in 2021?
Before we look at 2022’s calendar of green IPOs, let’s examine how similar stocks did in their 2021 debuts. We will list five of the most significant green IPOs from 2021, in ascending order according to their post-IPO performance.
The most disappointing entry in this list is Oatly, a Sweden-based producer of oat milk and related products. After a May 2021 IPO that priced its shares at $17, Oatly’s share price dropped 55% by year’s end. Amid continued supply-chain worries and disappointing sales, Oatly’s share price now stands at $4.71, a post-IPO fall of more than 72%. If pandemic-related issues were truly the prime cause of Oatly’s woes, the company may be able to begin earning investors’ confidence through more reliably strong sales in 2022.
German electric vehicle (EV) manufacturer Sono Motors also suffered a disappointing 2021. In the space of just a month and a half, Sono went from a highly successful November 16 IPO that saw its shares valued at $15 to an all-time high of $38.20 just a day afterward, followed by a steady slump that took its share price down 32% by year’s end. It now trades at $4.10, a decline of more than 72%. Sono was on the verge of insolvency at the time of its IPO, and its first production vehicle, the partially solar-powered Sion, is scheduled for delivery in H1 2023. However promising its technology, Sono might well face tough sledding in the next 12-15 months as it seeks to move forward without a marketable product.
Now for some brighter news. Vegan-food company Veganz offers a line of more than 120 plant-based products sold in more than 20,000 retail locations throughout its native Germany and neighboring countries. Its November 2021 sustained investors’ confidence, posting a 5% gain by the end of the year. Veganz used the capital generated by its IPO to expand its line of dairy and meat alternatives, but a wider product line did not lead to commensurately increased sales. Lower-than-expected earnings have driven the company’s share price down from €87.00 at the time of its IPO on the Frankfurt Stock Exchange to €51.70 today, a decline of more than 31%.
US-based Rivian seeks to expand the EV market with a line of electric SUVs and light trucks. It debuted on the NASDAQ exchange in November 2021, and posted a 38% gain by year’s end. As with most stocks, Rivian’s 2022 performance has been underwhelming, and as of this writing it has fallen 64% below its initial price. Still, Rivian may prove to be more resilient than its Q1 2022 performance might suggest. Unlike Sono Motors, Rivian made its IPO after delivering its first vehicle to a paying customer. Amazon and the Ford Motor Company are each investors with an interest in purchasing fleets of Rivian vehicles, and its first model, the R1T pickup truck, was named 2021 Truck of the Year by Motor Trend.
Lucid Group delivered its first electric car, the Air Sedan, on October 30, 2021, more than three months after its July IPO. Investors had their faith rewarded by a 264% rise in the company’s share price by the end of the year. Consumers, for their part, saw the Air Sedan named Motor Trend’s 2021 Car of the Year. Its success was supported by financial updates that documented more than 17,000 reservations for Lucid vehicles just weeks after its IPO, and updated projections of more than $2 billion in 2022 revenue. Lucid is developing a luxury SUV, and hopes to achieve $10 billion in sales by 2024. Despite the general downturn across global stock markets in 2022, Lucid’s share price is still more than 150% above its initial level.
What Pure Climate stocks are planning IPOs for 2022?
This could be an extraordinarily active year for Pure Climate Stock debuts, however, the current bearish market sentiment due to the war in Ukraine and the resulting energy supply crisis might delay IPO plans. Here are five that we find especially intriguing.
Swiss technology group ABB established E-Mobility as a subsidiary devoted to EV charging products. Its IPO is scheduled for Q2 2022 on the SIX Swiss Exchange; while ABB appears ready to retain a majority stake in the company, the extent of that stake is still unclear. ABB E-Mobility seeks $750 million from its IPO to support both organic growth and acquisitions.
Somewhat unusually in the green-investment space, ABB E-Mobility is a well-established company. Founded in 2010, it has sold more than 680,000 charging stations in more than 85 markets. The upcoming IPO seeks to gain momentum from E-Mobility’s next generation of charging stations, which the company claims can fully charge a car in 15 minutes.
Another EV manufacturer, Polestar was established in 1996 and acquired in 2005 by Volvo. It raised $1 billion+ it raised through a SPAC merger with blank check company Gores Guggenheim announced in late 2021. When the deal closes in H1 2022, shares of Gores Guggenheim will effectively represent Polestar. The merger valued Polestar at roughly $25.5 billion, which may turn out to be a rather low projection: Polestar expects to generate more than $3 billion in revenue in 2022.
German business newsmagazine Wirtschaftswoche announced in late 2021 that Thyssen-Krupp plans an IPO for its hydrogen business, Nucera, some time in 2022. If Nucera is completely spun off from Thyssen-Krupp, it would represent a pure climate player. If other Thyssen-Krupp businesses, even its water-purification business, are included in the new entity, it would not qualify as a pure climate player.
Italian oil firm Eni also operates a renewable energy business, which it plans to spin off in 2022. Eni R&R, as the new business will be called, will go public with a target valuation of €15 billion. Eni is still working on the details of the spinoff, which might include its power retail business. If that is the case, Eni R&R may do substantial business in non-renewable electricity retail, which would disqualify it from consideration as a Pure Climate Stock.
While it has not announced a firm timeline, all signs point to Impossible Foods going public in the near future. CEO Patrick O. Brown has called the development “inevitable,” but what form such a move would take is still a matter of speculation. Regardless of whether Impossible Foods seeks a listing under its own name or by virtue of a SPAC merger, insiders have been quoted by Reuters as suggesting that the company seeks some form of public listing with a target valuation of $10 billion.
2021 was an eventful and in many ways encouraging one for newly listed green companies. 2022, on the other hand, has presented headwinds to the entire market, and younger companies fresh off their IPOs have found it especially difficult to sustain relatively high market valuations.
Above all else, this goes to show that stocks tend to reward long-term thinking. Tesla and Solaredge, which have gone on to perform so remarkably well, each fell below their initial asking price some time after their IPOs. With research, perseverance, and a careful approach to long-term risk management, today’s investors can poise themselves to benefit from the green economy’s next wave of success stories.
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