On July 26, 2021, a brave analyst decided to buck the herd and publish an article exposing the folly of the valuation of two then-hot electric vehicle stocks, Lordstown Motors (RIDE) and Proterra (PTRA) . As news of Proterra's bankruptcy filing Monday "shocked" investors on the heels of Lordstown Motors' similar filing on June 27 of this year, I had to fire up Google and find that brave analyst.
The article was published on this very platform, Real Money, and the analyst was....yeah, it was me.
As the equity in Proterra is now as worthless as the equity in Lordstown Motors has become, it is time to ask the question: how did the markets get it so wrong? The answer is a combination of hubris, herd mentality, and just some good old-fashioned Wall Street bubble stupidity.
Space constraints limit my ability to delve into the company-specific details of RIDE and PTRA, and, frankly, that level of research is proprietary to my firm, Excelsior Capital Partners and our clients. Occasionally we get one right, or, in this case, two.
Both RIDE and PTRA were products of SPAC deals, and, really, that should have been the first clue that something might be fishy about these two companies. Typically vehicular companies would go through the heavily-vetted process of filing an IPO, a process I was part of for several companies during my years as a sell-side autos analyst. But Proterra and Lordstown Motors took shortcuts to get access to the public equity markets...and shortcuts are often expensive.
Proterra is particularly offensive to me as a free-markets advocate as the company hoovered up as much public funding as possible, while cultivating (bribing?) politicians to get these sweetheart deals. As has been widely reported, current Biden Administration Energy Secretary Jennifer Granholm previously served on Proterra's Board of Directors. This obvious conflict of interest led to public outcry, and eventually Granholm's disposal of her stake in PTRA in May 2021, two months before my Real Money article was published.
Those share sales reportedly netted Granholm a capital gain of $1.6 million. Today those shares would be essentially worthless.
Friends in high places cannot compensate for poor performance, though, and Proterra's buses had a terrible record in municipal use, specifically in Philadelphia, the example I mentioned in that July 2021 Real Money article. It just makes no sense to put batteries on an EV bus on the roof. It is a Rube Goldberg-style workaround that anyone with any engineering background should understand. The batteries need to be under the floor, as a solution used by Vicinity Motors (VEV) , a company that I have also mentioned - in a much more positive context than my mentions of PTRA - in my Real Money columns, and by other EV bus manufacturers, as well
But at least Proterra made buses, albeit awfully-performing ones. It is unclear to me whether Lordstown Motors ever made anything, let alone commercializing actual units of their highly-touted medium-duty EV truck, the Endurance.
RIDE somehow managed to con Foxconn into a joint manufacturing deal at RIDE's facility in Ohio, a former car plant for GM - which I know from years of experience is a very easy management team to con, as happened with RIDE, in which GM was an early investor - but Lordstown Motors never fulfilled all, or, possibly "any", of the requirements of that deal with Foxconn, and that led to technical default, which, inevitably, became very real default.
Equity worthless... again. Two for two!!!!
Just don't get conned. The job of an equity analyst, as my old Lehman Brothers colleague and legendary industrials analyst Bob Cornell used to say, is to be a "professional cynic".
The lack of cynicism in bubble years is so predictable... and so expensive. I am launching a new product, The Rising, that will deal with such situations. I have named it as a nod to those brave souls who rise against the insanity of climate change hysteria.
Touting investment in soon-to-be-insolvent EV companies is just one symptom of the disease of ESG investing, but there are many from which to choose. Those choices, as in the cases of RIDE and PTRA, can be lucrative for perceptive traders. Short-sellers can indeed make great profits through the falling.
Keep your eyes open. And come on up for The Rising. Your portfolio value, hopefully, will fit that title.
