Well, I was wrong. The market still enjoys reacting to the same now-rotted carrot, known as a stimulus package, being dangled in front of them. Pelosi swears today is the deadline to come to an agreement, so I'm thinking that overnight volatility is in play if that's your kind of trade. Something along the lines of a straddle or a strangle on the market or high beta market-linked names. The volatility index isn't cheap around 29, but it is slightly lower on the day, so the market isn't currently pricing in any hiccups or glorious results from today's 3 pm EST meeting. I imagine the pressure is building to get something done, but I still don't see it.
Buyers in Virgin Galactic (SPCE) were greeted with a rude awakening post-lunchtime as shares reversed after comments from Jim Chanos saying he would go long any public space companies send shares higher. Later, we find out he was being sarcastic, making a joke. Unfortunately, those who bought the stock off of these comments aren't laughing now as the stock has given back virtually all of its gains since that time. We watched the stock go from $23 to $24.40 and back to $23.10. Just another thing summing up 2020 for you.
General Motors (GM) is a big mover on the day as the legacy automaker said it is transitioning its Spring Hill plant in Tennessee to build electric vehicles. It added that five Michigan plants will also transition. This on top of a couple of plants already in the EV manufacturing process. Overall, the company will invest $2 billion in the Spring Hill plant. That brings the company investment total to around $4.5 billion in less than the last two years for its plants. That's in addition to the $2.3 billion manufacturing facility in Lordstown, Ohio for battery cell manufacturing. Lordstown is also where we find Lordstown Motors, an EV truck maker partly owned by Workhouse that is using an old GM facility.
In short, GM is sinking more cash into investments than the market cap of many of these newly listed non-revenue producing electric vehicle and battery cell manufacturers. Even at a $46.5 billion, GM may be cheap in comparison to other EV companies. NIO (NIO) checks in with a market cap of $37 billion, Li (LI) around $16 billion, and Xpeng (XPEV) at $15 billion. While these have revenue, they aren't sniffing profitability yet. They also don't have brands stateside, so while they will dominate China, the U.S. is searching for another player or players to ride with Tesla (TSLA) .
And before you write off Ford (F) , remember they have a stake in Rivian, the EV truck builder that also has Amazon (AMZN) as an investor. Rivian is really the EV company I wanted to see come public as I feel they may be first to market with a pickup truck.
Overall, I'm starting to believe the legacy automakers may be the best way to play the EV space in 2021 as they begin to transition over fully into the space with a name and cash flow stronger than many of the upstarts. I expect we'll see a merger or two, but I won't be shocked to see a few of the infant EV makers only last a year or two after productions before falling to a lack of sales or a lack of production partners. In the end, the legacy autos may be in the best position to command favorable deals from the newcomers in order to share production capabilities and cost.
Ford and GM look like must owns to me for 2021.