2020 has ushered the EV industry into limelight as consumers have grown more environmentally cautious. With both developed and developing nations announcing measures to curb pollution, clean energy and EV companies are benefiting from huge investor attention across the globe…
What began as a good year for Tesla, Inc. (TSLA) spilled over into to many burgeoning EV companies as investors discouraged by the high price of TSLA stock went looking for lower priced alternative companies with similar growth potential. Recognizing this, emerging companies have invested heavily in marketing and advertising to lure investors, which has helped their shares to register double or even triple-digit gains year-to-date, even without the financials to support this growth.
Companies such as Nikola Corporation (NKLA – Get Rating), Kandi Technologies (KNDI – Get Rating) and Electrameccanica Vehicles Corp (SOLO – Get Rating) are prime examples of overvalued stocks that have reported losses over the past couple of quarters. We believe that these stocks, which are driven currently the booming EV sector, could crash at any moment because, they due to insufficient production capacity to justify the ultra-premium valuation of their shares.
Nikola Corporation (NKLA – Get Rating)
NKLA made headlines earlier this year when it went public through a SPAC with blank check company Vector IQ. The company designed first-of-its-kind hydrogen fuel-cell powered electric trucks that quickly became a big hit. As investors flocked to the name, NKLA gained 178.5% within 5 days of its public debut on June 4th, hitting an all-time high of $93.99.
However, the bubble soon burst as Hindenburg Research published a report that pointed to alleged misconduct by company and its CEO Trevor Milton. NKLA had allegedly falsified the type of technology used in its production to sway investors and published misleading reports regarding its progress in production. Following this report, in September, Milton resigned in September.
To fixits tainted reputation, NKLA announced a partnership with General Motors (GM) in September. Under this deal, GM was supposed to acquire an 11% stake in NKLA and be a major supplier of hydrogen fuel-cells for NKLA trucks. However, the deal fell through in November. Currently, the companies have signed a non-binding Memorandum of Understanding (MoU) under which GM will supply Hydrotec fuel systems for NKLA’s semi-trucks.
NKLA is still constructing its manufacturing facilities in Coolidge and Arizona, after which production should begin.
NKLA reported a loss from operations of…
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