EVgo Shares Surge on $2 Buyout Offer from LS Power

What happened

LS Power, EVgo's controlling shareholder, has offered to acquire the remaining shares at $2.00 each, causing a 48% surge to $1.87. The offer represents a 33% premium to the previous close and comes after a 65% decline over the past year. The DeepValue report had a WAIT rating with a base case value of $1.60 and a bull case of $2.20, placing the offer within that range but below the bull scenario. However, the offer is from a controlling party, which may limit the potential for a higher bid and the deal's completion is subject to conditions. Investors must weigh the certainty of $2.00 against the company's long-term potential if operational initiatives succeed.

Implication

The $2 offer is above the current trading price and likely to be accepted if deemed fair, but LS Power's control limits minority shareholders' ability to negotiate a higher price. Given ongoing cash burn and execution risks, the offer may be a reasonable exit for fundamental investors. The stock may trade slightly below $2 due to deal risk and time value. Long-term holders who believed in the Tesla/NACS story might find the offer underwhelming compared to the bull case of $2.20, but achieving that without a buyout was improbable. Investors should consider selling into strength or holding until deal closure, with limited upside beyond $2.

Thesis delta

The previous thesis was WAIT with a base value of $1.60 and entry below $1.30, predicated on operating improvements. The buyout offer at $2 transforms the investment case from a fundamental turnaround play to an event-driven situation. The stock's value is now anchored to the offer price, with key questions around deal completion and potential for a higher bid.