Tuscan Holdings Corp.

THCB Details

A Special Purpose Acquisition Company: Tuscan Holdings Corp. (NASDAQ: THCB) is a blank check company formed for the purpose of acquiring and combining operating entities. The company was incorporated in November 2018 and went public on March 2019. THCB board comprises of Stephen A. Vogel, Chairman and CEO, who has over 40 years of private equity experience.

IPO Details: Through IPO, THCB raised gross proceeds of $240.0 million. Following the private placement and sale by underwriters, THCB garnered total proceeds of $276.0 million that were placed in Trust Account. The company created Trust Account solely to fund acquisition/ business combinations. The working capital requirements were met using funds created outside the Trust Account. As of September 2020, cash of $255,886 was held outside the Trust Account.

3QFY20 Key Financial Highlights: With nil operations, THCB generated investment income and incurred operating expenses related to IPO and due diligence. It had reported loss of $101,287 during Q3 FY20. On nine months ending, THCB made profit of $1.50 million mainly from interest earned from investments in marketable securities. It had available cash balance of $255,886 as of September 2020 and non-current investments of $282.2 million held in Trust Account. As of April 2020, THCB received commitment from Sponsor for $500,000 loan to the company. As of September 2020, $200,000 was outstanding under it.

3QFY20 Income Statement (Source: Company Reports) 

THCB Plans to Merge with Microvast: On 13 November 2020, Tuscan Holdings Corp verified that it has signed a letter of intent ("LOI") linked to a business combination with Microvast Inc., an electric battery maker. Microvast manufactures batteries that are used in buses. It has manufacturing facility in China. Microvast is expected to generated revenues of about $100 million in this financial year. However, no official press release or communication made available by Microvast and THCB on the deal.

Key Risks: THCB is exposed to liquidation risk. As of September 2020, there were no operations, and no businesses were identified for acquisition. The company made loss in September 2020 quarter. Earlier the company had December 7, 2020 as the cut-off date to complete an initial business combination. As on December 3, 2020, THCB received shareholders’ approval to increase the date to April 30, 2021. Post this date, THCB will liquidate if no businesses were identified. 

Stock Recommendation: The stock is currently trading close to its 52 weeks’ high level of $13.75. The stock yielded one month returns of ~25.3%. It performed ahead of broader index with ~28.31% YTD returns as compared to +14.59% by S&P 500 Index. On a technical analysis front, the stock has a support level of ~$11.96 and a resistance level of ~$12.92. With a cash balance of $0.256million and non-current investments of $282.2million held in Trust Account, the company has adequate headroom to pursue proposed acquisition as per the news announcement. We suggest investors to “Buy” THCB stock as the proposed deal may increase the potential value of THCB. The existing investors may have the chance to participate in the newly created entity as per the news release. The stock closed at $12.78, up by 2.65% on 8 December 2020.

THCB Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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