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Can the electric vehicle startup fight its way to viability amid an urgent crowd of SPACs?
Amid the spate of electric vehicle (EV) SPACs in 2020 and 2021, Lordstown Motors (NASDAQ: RIDE) is currently at the top between bullish and bearish views of the entire EV sector. Today, Hindenburg Research released a report on Lordstown Motors purporting to uncover a number of key startup issues and cornering Lordstown’s stock value.
To counter this, Hindenburg is known to be short in Lordstown Motors and has similarly posted negative allegations against other companies that it has cut back in the past. In this case, where is the balanced view of an investor?
Lordstown Motors: The Bull case in its stock forecast
Source: Getty Images
Lordstown Motors was launched as a public share in October 2020 through a merger with DiamondPeak Holdings Special Purpose Acquisition Company (SPAC) and entered the market with a notable advantage: the purchase of the Lordstown, Ohio Assembly Complex from General Motors (NYSE: GMC) in 2019.
Unlike competitors like Nikola Motor Company (NASDAQ: NKLA), having barely started building their first facility on empty land, Lordstown owns an actual factory and presumably machinery, which brings it much closer to actual production and a potential first mover advantage among recent EV Represents startups.
General Motors also thought enough of the company to invest $ 75 million in the company. Although the amount is small, Lordstown has effectively secured the recognition of one of the largest automakers today. In terms of valuation, the approximate $ 1.6 billion equity value at the time of going public could potentially be less inflated and more realistic than other startups.
As just one example is the Churchill Capital IV (NYSE: CCIV) achieved an implied valuation of $ 60 billion for its merger partner Lucid Motors the day after the merger was announced. That actually rated the small startup higher than Ford Motor Company (NYSE: F) Market cap of $ 48.8 billion. Lordstown’s much more conservative valuation appears to have more real value than a speculative bubble.
Lordstown Motors is led by Steve Burns, founder and former founder CEO of the Workhorse Group (NASDAQ: WKHS), which actually made working vehicles. Lordstown Endurance’s electric pickup truck has engines in the wheels that provide product differentiation and a type of vehicle that doesn’t exactly match what competitors are currently offering or near.
Lordstown is committed to a specific production schedule and says it will be a topical example of the endurance electric pickup truck at the San Felipe 250 cross country race on April 17th in Baja, California. Delivery is scheduled to begin in the third quarter (3rd quarter) of 2020. Lordstown’s ability or inability to meet these deadlines will, in the near future, give investors multiple data points to gauge their proficiency in bringing a successful electric vehicle to market, relying on indefinite promises.
The bear fall for Lordstown’s stock forecast
On the bearish side of the equation, Hindenburg put Lordstown Motors stock on a downward trend today (March 12) by accusing them of inflating or falsifying the number of Endurance pickup orders. The short seller claims “the company’s orders are largely fictitious and used as props to raise capital and give legitimacy,” citing Lordstown’s approximately 100,000 pre-orders.
In response, Lordstown points out that it has always been made clear that “orders” are not actual orders, but are completely non-binding pre-orders, which are used by many automotive companies, both now and in the past, to measure interest .
Similarly, Hindenburg has signed a contract for 14,000 trucks from E Squared Energy, which allegedly represents $ 735 million in revenue, advising that E Squared does not operate a fleet of vehicles.
While it is literally true that the company does not operate a fleet of trucks, its CEO Tim Grosse told The Business Journal that E Squared “buys vehicles for communities and customers who don’t have a big budget to switch to electric vehicles,” so the lack of A Company Fleet does not invalidate pre-orders, as E Squared is merely acting as an intermediary for third parties, many of whom are state-owned.
Potentially more worrying for investors than Hindenburg’s criticism is the sheer number of EV startups in recent months. Lordstown Motors is one of many new launches in a crowded environment where the market will inevitably cause many startups to fail. According to an October 2020 report by Barron, eight EV startups had already gone public through SPAC mergers or would do so in the US alone in the coming months, with at least two more going public in China.
In such a crowded environment, Lordstown needs to work efficiently and produce a high quality, attractive product to avoid faltering after launching a more successful competitor. It may succeed, but that success remains an extremely risky unknown, as is the case with all current EV startups.
Add it it: RIDE’S share forecast for 2021
The current advertising battle between Hindenburg’s accusations and Lordstown Motors’ rejection denies deep uncertainties across the EV startup market. Electric vehicle startups have popped up like mushrooms in recent years, with a particularly large number popped up in 2020.
A balanced view could see the EV market as a promising new sector supported by technological momentum and consumer sentiment Teslas (NASDAQ: TSLA) The Teflon-like immunity to countless bear cases in recent years shows this. There are great opportunities to win, but as in any dynamic, emerging new market, most startups will fail.
Investing in a new EV company at this stage is a gamble. The market will knock out most of today’s competitors while some will thrive and grow explosively. Investing in this sector is a shot in the dark, with a high risk of default but little chance of spectacular future returns.
Even so, Lordstown Motors still seems like one of the better bets out there. The product is different from most of its competitors, it has an actual manufacturing facility, General Motors sees enough potential to support it, and its schedule should produce tangible results in 2021 that will allow for a better assessment of whether it will be successful or not will fail as competitors who do not provide actual production production data.
Any investment in an EV startup should only be made if the investor is willing to lose the money invested, but Lordstown seems comparatively better than most.
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