Electra Meccanica/Tevva merger gets thumbs up at Roth

A proposed merger between Electra Meccanica Vehicles Corp (Electra Meccanica Vehicles Corp Stock Quote, Chart, News, Analysts, Financials Nasdaq:SOLO) and U.K.-based Tevva is a positive for both, says ROTH MKM analyst Craig Irwin.

On August 15, SOLO announced the proposed merger.

“We are incredibly excited to partner with Tevva given their unique engineering expertise in an essential segment of a large and growing market,” said Electra Meccanica CEO Susan Docherty. “We believe this is the right time and Tevva is the right partner with which to pivot from consumer vehicles to commercial vehicles and respond to commercial fleet customer demand for superior, reliable and cost-efficient trucks. The complementary operations of the two companies and our similar values and mission give me complete confidence we can jointly create significant shareholder value. Tevva is extremely well positioned in the U.K. and European market and our world-class manufacturing facilities, combined experienced senior executive team and balance sheet will help take our combined company to the next level.”

Irwin said he likes the deal.

“We are positive on the proposed merger between Electra Meccanica and Tevva, as we see obvious synergies. Tevva has a 7.5 ton EV truck certified for European markets with manufacturing in Tilbury, UK, while SOLO brings a substantial cash balance and existing production capacity at the Phoenix, AZ
facility that could easily produce Tevva trucks. We see Federal support of $40k per truck expected under the IRA and Tevva’s nearly one million miles of real life testing as features of a compelling match for SOLO’s market pivot,” he said.

In a research update to clients August 23, the analyst maintained his “Neutral” rating on SOLO but raised his one-year price target on the stock from $0.60 to $0.75.

“The target is in line with current market valuation for Electra Meccanica, which we see as fair in the near term given the transition in the business model,” Irwin added. “We see downside support from the cash position of $89m at the end of 2Q23, or $0.75 in cash per share.”