Why Harley Davidson’s Ev Motorcycle Livewire Is Getting Its Own Stock

For corporations, 2021 has been a year of big spinoff plans and volatile SPAC offerings. As of this week, Wall Street and investors had one more iconic name to add into both financial engineering columns: Harley-Davidson. The motorcycle maker announced plans to spin off its electric bike division, LiveWire, as a new company through a SPAC deal that values Harley’s EV business at roughly $1.8 billion. That’s not near the valuations some of the EV car makers, including Rivian Automotive and Lucid Group, have seen after recent market debuts, but it points to a fundamental challenge legacy companies, long leaders in their market, face as the world changes and mega trends such as energy transition and electrification become more central to investing. Across multiple sectors, climate change is leading to calls for a rethinking of how iconic companies are structured. Royal Dutch Shell recently came under activist investor pressure to consider spinning off its renewable energy business. GM and Ford, while expressing no interest on their own, have been subject to questions from the market as to whether new EV businesses may be better as stand-alone companies.”If anything this underlines what we’ve been saying for a long time. Detroit, wake up! The train has left the station! EVs are inevitable,” Roth Capital analyst Craig Irwin said in the Reuters report on the Harley-Davidson deal. “Many traditional OEMs (Original equipment manufacturers) with emerging EV businesses can obviously do similar spinoff transactions.”The special purpose acquisition company that LiveWire will merge with is an ESG-focused SPAC, AEA-Bridges Impact Corporation. Climate change isn’t the only major transition theme that is leading to calls for corporate breakups, as major department store companies including Macy’s and Kohl’s face investor pressure to spin off online retail operations as e-commerce continues to grow. And these debates about how best to realize shareholder value are taking place on a broader landscape of corporate spinoffs involving iconic companies from GE to Johnson & Johnson. For Harley-Davidson, the spinoff plan raises short-term questions about how best to fund and build a new business for a new transportation and consumer era, and longer-term questions about where the greater value will reside in the Harley-Davidson brand in the future — it will retain 74% control of the new company’s shares. Growth assets in the EV space are being valued differently than mature low/no growth assets like an internal combustion engine manufacturing enterprise, according to David S. MacGregor, Longbow Research analyst. “While the LiveWire spinoff isn’t yet being valued similar to other well-known EV stocks, the growth potential of the stand-alone business will be recognized in the years ahead and the valuation will follow,” he said.

All data is taken from the source: http://cnbc.com
Article Link: https://www.cnbc.com/2021/12/17/harley-bets-on-a-future-in-which-ev-may-be-bigger-than-hog.html

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