Kynny
A quick look at Forza X1
Forza X1 (FRZA) has filed for gross proceeds of $15 million from the sale of its common stock in an initial public offering, according to an amended registration statement.
The company is developing Electric boats for sale to consumers in North America.
FRZA has no track record in terms of sales or growth, so it is difficult to assess its near-term trajectory and the company’s premium/luxury product faces headwinds in an economic downturn.
I’m waiting for Forza X1 to go public, although it could attract day traders looking for volatility and a low nominal price.
Forza X1 overview
feet Based in Pierce, Florida, Forza was formed to develop and sell EV power boats for the consumer market in the United States.
Management is led by Chairman and CEO Joseph C. Visconti, who has been with the Company since its inception and is currently President and CEO of the Company’s parent company, Twin Vee PowerCats (VEEE).
The company’s main offerings include:
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FX1 dual console
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FX1 center console
Forza booked a fair market value of $2 million in equity investment from parent company Twin Vee PowerCats.
The company will sell its boats through a dealer-based distribution network in North America and the Caribbean, as well as through a direct sales platform.
Forza’s Market & Competition
According to a 2021 market research report by IDTechEx, the global electric and hybrid vessel market will quickly grow to over $20 billion worldwide in 2027 for non-military versions.
The main drivers for this expected growth are the environmental pressures against the use of “dirty ships”, where a single large ship emits enormous amounts of pollutants.
Also, many new things are possible with EV marine vehicles, including increased autonomy, greater quiet, energy independence, and faster acceleration.
Key contestants or other industry participants include:
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Boston whalers
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sea ray
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mastercraft
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Jamaica
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Bayliner
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chaparral
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Grady White
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Malibu
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Nitro
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world cat
Financial performance of Forza X1
Below are current relevant financial results from the Company’s registration statement:
Operating Invoice (SEC EDGAR)
As of March 31, 2022, Forza had $639,078 in cash and $120,388 in total debt.
Free cash flow for the three months ended March 31, 2022 was negative ($465,407).
FRZA IPO details
FRZA intends to sell 3.0 million common shares at a proposed mid-point price of $5.00 per share for gross proceeds of approximately $15.0 million, excluding the sale of customary underwriter options.
Assuming a successful IPO in the middle of the proposed price range, the Company’s enterprise value at IPO (excluding underwriter options) would be approximately $36.4 million.
The free float to outstanding share ratio (excluding underwriter options) will be approximately 30%. A number below 10% is generally considered a “low float” stock, which can experience significant price volatility.
According to the Company’s recent regulatory filing, it plans to use the net proceeds as follows:
approximately $8.0 million for the acquisition of land and development of a manufacturing facility for the construction, design and manufacture of our new line of electric boats;
approximately $2.0 million to ramp up production and inventory; and
approximately $2.6 million in working capital.
Based on our current operational plans and assumptions, we anticipate that the net proceeds from this Offering, together with our existing cash and grants, will be sufficient to support our operating expenses and capital expenditure requirements for at least 12 months after the closing of this Offering.
(Source – SEC)
Management’s presentation of the company’s roadshow is not available.
With respect to pending litigation, management says that the Company is not currently a party to any material litigation or proceeding against it.
The only listed bookrunner of the IPO is ThinkEquity.
Commentary on Forza X1
The company is seeking a spin-off from parent company Twin Vee PowerCats to begin manufacturing its line of EV recreational boats.
The company’s finances reflect expenses related to its development efforts, but the company has not generated any revenue from product sales.
The company currently plans not to pay dividends on its common stock and expects to use future profits to reinvest in its expansion efforts.
The market opportunity for hybrid electric or pure electric boats and vessels is expected to grow at a high growth rate in the coming years due to increasing environmental pressures and other advantages of quiet and powerful electric powertrain propulsion systems.
ThinkEquity is the sole underwriter and IPOs led by the firm over the past 12 months have generated an average negative return (69.2%) since its listing. This is a lowest performance for any major underwriter over the period.
The main risks to the company’s outlook are macro headwinds, which are dragging down growth estimates for North America, and commodity and wage inflation, which are pushing up manufacturing costs.
As for the valuation, management is asking IPO investors to pay an enterprise value of around $36 million at the IPO.
Forza’s parent company, Twin Vee PowerCats, has performed poorly since its IPO in mid-2021, and I don’t have a specific reason why Forza should fare better given the macroeconomic pressures on discretionary products, particularly luxury lifestyle products.
Also, the company doesn’t have a track record in terms of revenue or growth, making it difficult to gauge its near-term trajectory.
Although the IPO, with its low notional price, could attract day traders looking for volatility, I’m waiting for Forza X1 stock in the medium term.
Estimated IPO Price Date: To be announced.
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