Mad Hedge Technology Letter
June 11, 2021
Fiat Lux
Featured Trade:
(DON’T FALL INTO THE LORDSTOWN TRAP)
(RIDE), (NKLA), (VLDR), (TSLA)
Posts
Lordstown Motors Inc. (RIDE), an EV startup that recently went public, lacks the money to build a debut pickup truck and might go out of business if funding dries up in the next 12 months.
That’s what you get if you go for the “cheap” tech that offers some pipedream of fantasy managed by charlatans.
The company believes that its current level of cash and cash equivalents are not sufficient to complete the development of its electric vehicles and launch the Endurance pickup.
Investors should have seen this coming from a million miles away.
Lordstown went public through a SPAC and numerous have gone through upheaval as analysts critique their business practices.
Some, like Nikola Corp. (NKLA) and Velodyne Lidar Inc. (VLDR), have had their founders ousted.
Lordstown now has balance sheet problems.
In the filing, Lordstown said it has approximately $587 million in cash and an accumulated deficit of $259.7 million as of March 31, after reporting a first-quarter net loss of $125.2 million.
Going public gifted RIDE $675 million, but the company has burned through that quickly.
Let’s run down the list of red flags I have seen pop up at this supposed EV producer.
The company has no revenue and no sellable product, and they have most likely misled investors on both its demand and production capabilities.
The company has consistently pointed to its book of 100,000 pre-orders as proof of insatiable demand for its proposed EV truck.
Lordstown recently announced a 14,000-truck deal from E Squared Energy, supposedly representing $735 million in sales.
But E Squared is based out of a small residential apartment in Texas that doesn’t operate a vehicle fleet.
Another 1,000-truck, $52.5 million order comes from a 2-person startup that operates out of a Regus virtual office with a mailing address at a UPS Store.
Lordstown has thrived off the notion that the faster the pre-orders arrive, the greater investors’ confidence would be in the company and the faster funds would flow in and subsequently lift shares for long enough that management can cash out.
What management has failed to tell us is that these pre-orders are non-binding letters of intent, require $0 as a reservation payment, do not require an actual purchase.
Do I have other gripes about the company?
Yes.
Despite claims that battery packs would be manufactured in-house, the product is definitely not.
Former employees revealed that the company has completed none of its needed testing or validation, including cold-weather testing, durability testing, and Federal Motor Vehicle Safety Standards (FMVSS) testing required by the NHTSA.
Lordstown only went public in October 2020, but in that brief time, executives and directors have unloaded around $28 million in stock.
It seems awfully plausible that management is unloading stock because they think the company will ultimately fail and the stock will go to 0.
The pre-orders representing over $5 billion in future revenue couldn’t be further from the truth.
So basically this is an EV company out of the mold of Nikola that has no product but tout some marketing gimmicks as empirical evidence that should nudge investors to believe they are on the brink of full-out mass production.
It’s possible no company has ever done just on the basis of hyping up their non-binding, zero dollars down pre-orders and RIDE is still living off of these fumes.
Ultimately, the company isn’t even close to producing a car and any capital thrown at it is dead money that will disappear into a black hole.
It’s plausible that this is a sign of froth when marginal tech firms like RIDE can pull off their act for this long.
It almost makes sense as the market-altering retail army funnels capital to spin into meme trades and make a mockery of the real traders who try to treat this seriously let alone value investors.
I doubt that Reddit’s retail army will save RIDE since the word is out of their business practices.
It’s not too far-flung to consider that the same mysticism brought to the EV industry by Elon Musk is being deployed nefariously to excite the incremental investor that RIDE is about to strike it rich with the “next Tesla.”
The truth is that there is only one Tesla and there will be only one Tesla because they thread the needle through the hole popularizing the EV when there was no competition.
And now the conglomerates have closed that gap and are chasing after Tesla, meaning it’s impossible that there could even be another Tesla in 2021.
And by competition, I first mean GM, then the tier after that of Toyota, Ford, and European players who allowed Tesla to take the lead.
I would say that any reader mustn’t believe that charlatans masquerading as the “next Elon Musk” could be just as good as the real thing.
Take these words with a grain of salt.
Capital should not be considered in any of these unless there’s a real product and proof of product success.
And I am not even talking about accelerated earnings reports yet, or consistent outperformance, this is way off of that.
There are some instances where a premium is paid for potential, especially if it will shift the paradigm in the industry, but if it smells like a rat, the rat should prove he isn’t a rat and not vice-versa.
Global Market Comments
October 2, 2020
Fiat Lux
Featured Trade:
(SEPTEMBER 30 BIWEEKLY STRATEGY WEBINAR Q&A),
(NVDA), (AMD), (JPM), (DIS), (GM), (TSLA), (NKLA),
(TLT), (NFLX), (PLTR), (VIX), (PHM), (LEN), (KBH), (FXA), (GLD)
Below please find subscribers’ Q&A for the September 30 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!
Q: Which is a better buy, NVIDIA (NVDA) or Advanced Micro Devices (AMD)?
A: NVIDIA is clearly the larger, stronger company in the semiconductor area, but AMD has more growth ahead of it. You’re not going to get a ten-bagger from NVIDIA from here, but you might get one from Advanced Micro Devices, especially if a global chip shortage develops once we’re out the other side of the pandemic. So, I vote for (AMD), and did a lot of research on that company last week. You can find the report at www.madhedgefundtrader.com but you have to be logged in to see it.
Q: Do you have any thoughts on the JP Morgan Chase Bank (JPM) spoofing cases, where they had to pay about a billion in fines? Is this a terrible time to invest in banks?
A: No, this is a great time to invest in banks because this is the friendly administration to banks now; the next one will be less than friendly. On the other hand, an awful lot of bad news is already in the price; buying these companies at book value or discount of book like JP Morgan, it's a once in a lifetime opportunity. All the bad behavior they’re being fined on now happened many years ago. So yes, I still like banks, but you really have to be careful to buy them on the dip, just in case they stay in a range. If you stay in a range, you’re buying them call spread, you always make money. The bigger drag on share prices will be the Fed ban on bank share buybacks but that may end after Q4.
Q: Is it time to buy Disney (DIS) after they laid off 28,000?
A: This is a company that practically every fund manager in the company wants to have in their portfolio. However, it could be at least a year before they get back to normal capacity in the theme parks, meaning customers packing in shoulder-to-shoulder. So, it could be another wait-for-a-turnaround, buy-on-the dip situation for sure. This company is so well managed that you’re always going to have to pay up to get into the Mouse House. By the way, my dad did business with Disney during the 1950s so we got Disneyland opening day tickets and I got to shake Walt Disney’s hand.
Q: How desperate is General Motors (GM) in buying the fake Tesla (TSLA) company, Nikola (NKLA), who've been exposed as giant frauds? Is GM hopeless?
A: Yes, the future is happening too fast for a giant bureaucracy like General Motors to get ahead of the curve. The fact that they’re trying to buy in outside technologies shows how weak their position is, and of course, it’s a great way to get stuck with a loser, as Tesla selling out to anyone. The Detroit companies are all stuck with these multibillion-dollar engine factories so they can’t afford to go electric even if they wanted to. So, I expect all the major Detroit car companies to go under in the next 5 years or so. Electric cars are already beating conventional internal combustion engines on a lifetime cost basis and will soon be beating them, within 3 years, on an up-front cost basis as well.
Q: Will Netflix (NFLX) pass $600 before the year's end?
A: I’m expecting a monster after-election rally to new all-time highs in the market and Netflix will be one of the leaders, so easy to tack on another hundred bucks to Netflix. That’s one of my targets for a call spread if we can get in at a lower price. And if you really want to be conservative, buy 2-year LEAPS, two-year call options spreads on Netflix, and you’ll get an easy 100% return on those.
Q: Who will win, Trump or Biden?
A: Neither. You will win. I am not a member of any political party as I would never join any club that would stoop to have me as a member. Groucho Marx told me that just before he died in the early 70s. Don’t ask me, ask the polls. Suffice it to say that the London betting polls are 60%-40% in favor of Biden, having just added another 5% for Biden after the debate. My expectation is that Biden picks up another point in the opinion polls in all the battleground states this weekend. So, Biden will be up anywhere from 6-10% in the 6 states that really count.
Q: What will the market impact be?
A: It makes no difference who wins. The mere fact that the election is out of the way is worth a 10% move up in the stock market.
Q: Should we keep the January 2022 (TLT) 140/143 bear put spread?
A: Absolutely, yes. That’ll be a chip shot and we in fact should go in the money on those number sometime next year. A huge cyclical recovery will create an enormous demand for funds and crowding out by the government will crush the bond market.
Q: Do you think it would be better to wait a week or two to lock in refis on home loans?
A: I think we are at the low in interest rates in the refi market. Even if the Fed lowers interest rates, banks aren’t going to lower their lending rates anymore because there's no money in it for them. It’s also taking anywhere from 2-4 months to close on a loan, as the backlogs are so enormous. If you can even get a loan officer to return a phone call, you’re lucky. So, I wouldn't be too fancy here trying to pick absolute bottoms; I would just refi now and whatever you get is going to be close to a century low.
Q: Why so few trade alerts?
A: Well, very simple. We only do trade alerts when we see really good sweet spots in the market. There aren’t sweet spots in the market every day; you’re lucky if you get 1 or 2 in a month. Then we tend to pour in and out of the market very quickly with a lot of alerts. There is no law that says you have to have a position every day of the year. That buys the broker’s yacht, not yours. You should only have positions when the risk reward is overwhelmingly in your favor. That is not now when our market timing index is hugging the 50 level. At 50, you actually have the worst possible entry point for new trades, long or short, so I’d rather wait for it to get away from that level before we get aggressive again. We have gone 100% invested multiple times in the last two months and made a ton of money. So, you just have to wait for your turn to get a sweet spot, and then you’ll make a very quick 10% or 15% in the market. Patience is rewarded in this business.
Q: Would you wait for the election because of the high implied volatility?
A: No, I would not wait. The game is to get in at the lowest price before the election. When the implied volatilities drop after the election, the profits you can make on these deep out of the money LEAPs drop by about half. Thank the volatility while it’s here because it’s creating great trading opportunities now, not in two months after the volatility Index (VIX) has collapsed.
Q: What about Zoom (ZM)?
A: As much as Zoom has had a 10-fold return since we recommended it a year ago, it looks like it wants to go higher. The Robinhood traders just love this stock; it’s a stay at home stock, stay at home is lasting a lot longer than anyone thought. Zoom is just coining it on that.
Q: Is the best outcome a Biden presidency and a Republican Senate?
A: No, that is the worst outcome. When you have a global pandemic going on, you don’t want gridlock in Washington. You want a very active Washington, controlled by a single party that can get things done very quickly. That is not now, which is possibly a major reason that we have the highest Covid-19 death rate in the world. It’s because Washington is doing absolutely nothing to stop the virus; the president won’t even wear a mask, so yes, you need one party to control everything so they can push stuff through. If it works, great, and if not then you kick them out of office next time and let the other guys have a try.
Q: Will property markets be up 20% by the end of the year?
A: If you live in a suburb of New York or San Francisco, then yes it will be up that much. For the whole rest of the country, the average is more like 5% gains year on year. In the burbs of these big money-making cities, prices are going absolutely nuts. My neighbor put his house up and it sold in a week for a $1 million over asking. So, the answer to that is yes, hell yes.
Q: Can you explain why the IPO market is suddenly booming now?
A: A lot of these companies like Palantir (PLTR) have been in development for 20 years, and prices are high. On valuation terms, we are at dot com bubble peaks now. That is the very best time to take your company public and get a huge premium for your stock. When the world is baying for paper assets, you print more of them.
Q: What is the best way to play real estate?
A: Buying the single home building companies like Pulte Homes (PHM), Lennar Homes (LEN), and KB Homes (KBH).
Q: What is your Tesla overview in China?
A: Tesla’s already announced that they’re doubling production of the Shanghai factory, from 250,000 units a year to 500,000. They built the last one in 18 months. It would take (GM) like 5 years to build something like that.
Q: Why has gold (GLD) lost its risk-off status?
A: It’s now a quantitative easing asset—like tech stocks, like bitcoin, and the stay at home stocks. It is being driven much more by QE-driven speculators flush with free cash than anyone looking for a flight to safety bid. When this group sells off, gold drops as well. The only risk-off asset right now is cash. That is the only “no risk” trade.
Q: What does reversal in lumber prices tell you?
A: Lumber was another one of those QE assets—it tripled. But you have this monster increase in new home building, huge demand for new homes in the suburbs, huge import duties leveled by the Trump administration on lumber coming from Canada. Also, a lot of people are getting COVID-19 in the lumber mills. So, they’re having huge problems on the production side in lumber, as a result of the pandemic.
Q: Are there any alternative ways to buy the Australian dollar besides (FXA)?
A: You go into the futures market and buy the Australian dollar futures. That is an entirely new regulatory regime so can be a huge headache. It requires you to register with the Commodities Futures Trading Commission, which is the worst of all the major regulators, but that is an alternative. If you’re an individual and not regulated instead of being a professional money manager, then it’s much easier.
Good Luck and Stay Healthy
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Summit of Mount Rose
Global Market Comments
September 18, 2020
Fiat Lux
Featured Trade:
(SEPTEMBER 16 BIWEEKLY STRATEGY WEBINAR Q&A),
(INDU), (TSLA), (DIS), (NKLA),
(GM), (PYPL), (FXI), (XOM), (KCAC),
Below please find subscribers’ Q&A for the September 16 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley, CA with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!
Q: Is the Russian vaccine real or just a publicity stunt?
A: I would say it’s real. Russia is much more prone to experimentation, that is a luxury they have. If they kill off a million people because the vaccine is no good, there is no litigation risk. So, it may work, but it is a high-risk drug.
Q: What will a contested election mean for the markets?
A: The Dow (INDU) will be down 2,000 points in one day. But I don’t think it’s going to happen; I think the media has greatly exaggerated the chances of a Trump victory. I don’t think there are any undecided votes now. The only way you’d be undecided by now is if you’ve lived in a care for the past four years. The market has got this completely wrong, and once it’s clear who won, you’ll get a monster rally in the stock market that goes until this year’s end, and the game from here until election day is to try to get into the market as low as possible before then.
Q: Do you think big tech is a crowded trade, and what do you think will eventually happen?
A: It is an extremely crowded trade; eventually it will go down big. If you remember the Dotcom Bubble, everything dropped 80% or went to zero. Having said that, we’ve never had this amount of Fed stimulus before, so we should go higher first, especially after the election. The fact is that the big techs are growing gangbusters—30%, 40%, or 50% a year so spectacular multiples are called for. This is the argument Mad Hedge Fund Trader has been making for the last 10 years, by the way.
Q: Do you think the residential real estate market will crash before or after the election?
A: I would say well after the election because I don't think it will crash until 2030. All these millennial buyers are out there in droves, interest rates are at record lows, and you have this massive work-at-home trend going on, which is going to be largely permanent. So, all of a sudden, the demand is huge for homes that you can convert into a kitchen with 4 home offices. A lot of companies have discovered this to be a very profitable way to work. So, I don’t see any crash happening in housing, perhaps even in my lifetime. We’re not seeing all the excesses in housing now that we saw in the Great Recession 13 years ago.
Q: How will Joe Biden’s election change the wealth of America’s finances?
A: Move money from the extremely rich to the middle class. That is the one-liner. It looks like any tax increases for individuals who make less than $400,000 a year will be minimal. The big hit will be those that make over a billion a year, and that category could even see Roosevelt level tax rates of 90% or more.
Q: What do you think of the condo market in San Francisco?
A: It is terrible now with prices down about 20%. We’re seeing exactly the same thing in New York City as people flee to the suburbs, and in the meantime, we have bidding wars going on in the outer suburbs. This will continue for about another year until people pour back into the city once the pandemic all-clear signal is given. That may be in about two years.
Q: Tesla (TSLA) has retraced half of its recent losses; do you think it will go another leg higher?
A: At this point, Tesla is an extremely high-risk stock. I would only want to be day trading it. The overnight gaps are so enormous. At $500 a share, it’s discounting a best-case scenario for 2025 already, so that is kind of stretching it. Better to buy the car than the stock.
Q: Do you have any other names in the EV market to recommend?
A: Absolutely not; most of the other entrants in the market have no cars and no mass production abilities, which is the real challenge, and are lagging Tesla with terrible designs. Tesla essentially has the lock on that market, and a 10-year head start. They are accelerating their technology and the only other serious producer in volume is General Motors (GM) with their Bolt, but that hasn’t really taken off. It is cheap at $30,000 but the next thing to happen is that Tesla will drop the price of their model Y below the price of the Bolt which will kill it off. But no, I wouldn't touch any of these other things. The future is all electric. Many people also underestimate the decade-long torture Tesla had to go through to get to where they are. I remember it because I have been with Elon from day one during his PayPal (PYPL) days.
Q: Would you sell Disney (DIS) here at $130? The economic climate for 2021 doesn’t look great for public mass entertainment.
A: That is all true, but their streaming business, Disney Plus, is taking off like a rocket. They just released Mulan, which I watched over the weekend with my kids and loved it. It will undoubtedly be the largest streaming movie release in history once we get a look at the numbers next month. So, they are moving into the online business at an incredible speed, and it may be enough to offset the enormous losses they are running from their hotels, cruise ships, and parks. And also, this is a reopening play big time—one of the few quality reopening plays out there—and the only reason to sell Disney here is if you think the corona epidemic will get dramatically worse and stay worse well into next year.
Q: What about battery names?
A: Batteries are still either owned by giant companies like Tesla or they’re small startups that have a nasty habit of going bankrupt. There really aren't any good clean publicly-listed plays on batteries in the markets these days.
Q: What about a short on Nikola (NKLA)?
A: If I were an aggressive day trader, that would be right in my sights. You can expect nothing but bad news to come out about Nikola. Taking a truck with no motor and then rolling it downhill and calling it a successful trial just invites short-sellers by the hoards. It’s already off 65% from its peak.
Q: Why do you say there's no future in hydrogen?
A: You need to build a large national hydrogen distribution network to make this economically viable and it’s just too expensive. Electricity infrastructure is already in place and just needs to be upgraded and modernized. Electricity is also infinitely scalable in improvements in power output, but hydrogen is only capable of straight-line improvement. No contest.
Q: What about the Solid-State Batteries?
A: I actually wrote a piece about this earlier this week. Solid-State Batteries could allow a 20-fold increase in battery efficiency for cars and houses and that may only be 2 or 3 years off as there are several in development now. QuantumScape (KCAC) is the listed leader there. Bill Gates is a major investor (click here for the link).
Q: Can we play a short-term bounce in big oil like ExxonMobile (XOM)?
A: You can, but remember, this is a trading play only, not an investment play. The long-term future for these companies is to go to zero or to get into another line of business, like alternative energy.
Q: What will happen to the market after the Fed speaks today?
A: My guess is stocks will rally as long as Jerome doesn’t say anything horrendous like “this is your last freebie; I’m raising rates at the next meeting,” which he is not going to say at the last Fed meeting before the presidential election.
Q: I am trying to get through all the fluff of misinformation out there; I want your opinion on who is winning the US-China (FXI) trade war.
A: The simple answer is that China has been winning all along. The proof of that is that their economy is growing and ours is shrinking. That’s because China managed to cap their Corona deaths at 4,000 and ours are at 200,000. In the meantime, the technology improvements in China have been enormous over the last 4 years, so none of the trade war issues, which by the way, were all focused on the lowest margin businesses that China did, have had any effect. If anything, it’s forced China to offshore their low margin business to cheap countries like India, Vietnam, and Bangladesh so they disappear as China trade. I always thought the China trade war was a mistake—it’s always better to trade with someone than go to war with them. I’ve done both and prefer the former.
Q: Do you think Biden is bullish for stocks, considering all the regulations that will be put back?
A: I don’t think there will be many regulations put back except for the energy industry, which has essentially operated regulation-free for the last three years. All of those controls—on flaring, on pipelines, and so on—those will all get put back because they were implemented by executive order, which can be reversed with the stroke of a pen. I don’t see much regulation anywhere else in the economy coming back. And in fact, since Joe Biden pulled ahead in the polls in May, the stock market has gone up almost every day. So clearly, the market thinks Joe Biden will be positive for stocks, and the possibility that he might implement an extra $6 trillion dollars in fiscal spending once in office is the reason why. You have to look at what these people do, not what they say. And my bet is that since Trump set the precedent for record deficit spending, Biden will continue that. And we’ll only worry about things like deficits when the inflation rate tops 5%, when interest rates go back to 10% in five years—all the reasons that caused the massive rise in deficits during the late 70s and early 80s.
Good Luck and Stay Healthy
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Sitting Pretty
Mad Hedge Technology Letter
September 11, 2020
Fiat Lux
Featured Trade:
(AVOID THE TESLA FRAUD LIKE THE PLAGUE)
(TSLA), (NKLA)
There is no car.
That is the conclusion from Hindenburg Research after an extensive investigation behind the origination and current business model of Nikola Corporation (NKLA).
This alleged “intricate” fraud has culminated financially with GM acquiring $2 billion in stock (an 11% stake) in Nikola for non-cash contributions such as engineering and validating a truck for Nikola, $700 million in expense reimbursements, supply contracts, and 80% of the EV credits.
What are the critical problems with Nikola?
There is a laundry list of them.
Inexpensive hydrogen is fundamental to the success of Nikola’s business model. CEO of Nikola Trevor Milton misled hundreds of people and in multiple interviews to have succeeded at cutting the cost of hydrogen by 81% compared to peers.
He also claimed that the company is producing hydrogen.
Nikola has not produced hydrogen at this price or at any price, as he later admitted when pressed.
Trevor claims Nikola designs all key components in-house, but it seems that they have merely bought them from third parties.
Nikola actually buys inverters from a company called Cascadia. In a video showing off its “in-house” inverters, Nikola concealed the Cascadia label with a piece of masking tape.
Their order book has been gerrymandered by touting multi-billion dollars that aren’t real. U.S. Xpress reportedly accounts for a third of its reservations, representing $3.5 billion in orders, but U.S. Xpress had only $1.3 million in cash on hand last quarter.
The actual development of the car has never come to fruition or even started, but seems like an elaborate hoax just to get investors' money by producing fake commercials.
In 2016, Milton hyped “The Holy Grail” of hydrogen technology for trucking, but there has been zero evidence of this.
Milton stenciled in “H2” on the truck despite the vehicle displaying zero hydrogen capabilities
Constructing a zero-emission hydrogen truck is rather difficult. However, merely stenciling “H2” and “Zero Emission Hydrogen Electric” on the side of a non-functioning truck is much easier.
Even the design has been outsourced to a company called Stellar Strategy LLC. Stellar is a well-known producer of off-road vehicles who had advised Nikola on the open cabin version.
The biggest fraud, which can’t be glossed over, is the claim about its battery technology.
Nikola claimed to have cutting edge battery technology, but that was merely a lie.
They planned to buy Battery Tech but found out after it was a vaporware company created by a man who had been indicted months earlier after using his NASA expense account to hire prostitutes.
In 2019, after a signed partnership with Bosch and Powercell, Powercell terminated its partnership saying the business terms were “totally unacceptable”.
After this marginal behavior, Nikola went public then giving it access to billions of public funding even though it had never designed, built, or delivered any resemblance of a car since 2014.
Then the CEO said it produces hydrogen for under $3/kg, representing a 81% discount to the rest of the world, but later admitted it was not true.
What about its staff?
Nikola’s director of hydrogen production/infrastructure is Milton’s little brother, who paved driveways in Hawaii before his Nikola job.
Nikola’s head of infrastructure development is the former general manager of a golf club In Idaho.
Lastly, Nikola’s Chief Engineer was a pinball machine repair guy before his Nikola job.
Nikola is clearly a front for Milton to transfer money into his personal life and has cashed out $70 million around the IPO and amended his share lock-up from 1-year to 180 days.
If he is fired, his equity awards immediately vest, and he is entitled to $20 million over two years.
Milton likely will never even start building a real car.
This is basically deception ranging from passing off fake products as real, staging of misleading videos, which require extensive premeditation, planning, and execution.
He has lied about the abilities of Nikola and the company simply has never even tried to build a car that the company is focused around.
The Tesla (TSLA) and Elon Musk narrative has made investors gullible to throw money at the next Tesla even if it is all a fake.
The money is literally funneled into Milton’s personal life allowing him to buy $50 million of Utah real estate.
The question now is what will GM do after they find out the truth about the matter?
GM might try to recoup the $2 billion (11% stake) if there is a possibility of reclaiming that capital, but if that is sunk money, they might choose to make the best out of a bad situation and elevate Nikola and make a real car out of it.
The only way to save this sinking chief is for GM to gut this fraudulent enterprise and put real engineers in Nikola with its real battery technology and leverage the brand of Nikola.
Nikola also has the support of the U.S. Central Bank that has propped up 40% of the S&P, are essentially zombie companies that cannot even service the interest on their debt.
Could this just be a $2 billion marketing cost for GM? It just might be.
In any case, there are many twists and turns coming up and GM might choose to write off $2 billion.
Unless GM decides to save Nikola, there is no new money coming in and that would be the time to short the stock.
The abomination that is the U.S. financial system encourages financial manipulation on an immense scale because the access to easy money has emboldened the conmen to come up with companies like this.
The insane reality is that CEO and Founder Trevor Milton was able to perpetuate this fraud for so long and cash out from investors who did not do any due diligence.
Nikola is now 7 years old and there are no signs of a car, only fake commercials of one.
The ball is squarely in GM’s court.
If GM cuts its losses, Nikola will never get another dime from any outside investor and is almost guaranteed that they will most likely not be able to produce a real car let alone a quality one with a golf club general manager, concrete repairman, and pinball repair guy at its helm.
I would be short GM – this strikes me as pitiful desperation. They have no chance of catching Tesla and over time, Nikola will fail unless rescued by outside technology, engineering, and management.
