Nikola stock craters after cancellation of major garbage truck order(arstechnica.com)
arstechnica.com
Nikola stock craters after cancellation of major garbage truck order
https://arstechnica.com/cars/2020/12/nikola-stock-craters-after-cancellation-of-major-garbage-truck-order/
31 comments
The fact that a public company doesn't have a working product just blows my mind.
This is the main difference between today's bull market and the Dotcom Bubble. Companies valued 100 P/E were the rule then. Today they're the exception.
Yeah you can't have a high P/E if you don't actually make a profit! AirBnB, Palantir, Snowflake, Uber, Doordash, Lots of 10's of billions in valuations, no actual profits yet.
They have revenue at least though, which wasn't really true of most of the dot-com failures.
Another important distinction is that a company like Airbnb could be profitable overnight if it wanted to. It is choosing not to.
I've heard this statement made many times about start-ups. The problem is often that, in changing their economics to generate a profit, they could allow competitors to take all their market share.
In the case of AirBnB with their $93b market cap to get a P/E of say 35, they would need to generate $2.6b in profit, so could they do that and not crater their market?
In the case of AirBnB with their $93b market cap to get a P/E of say 35, they would need to generate $2.6b in profit, so could they do that and not crater their market?
You have a good point. Still, many other hyped internet companies couldn’t be profitable even if they wanted to.
The average person has a really poor idea of what profit means because they analogize between their personal finances and a company's finances.
What profit means for a company is essentially: "Across my entire company, of all the things I could be doing, I couldn't find a single initiative that I believe will yield me a risk adjusted ROI that is greater than just leaving the money in a bank account."
Growing companies shouldn't be making a profit because they should be limited by their ability to execute on attractive growth opportunities fast enough. Mature companies can make profits because they've reached the limits of their attractive growth and now can be focused on harvesting the rewards.
What profit means for a company is essentially: "Across my entire company, of all the things I could be doing, I couldn't find a single initiative that I believe will yield me a risk adjusted ROI that is greater than just leaving the money in a bank account."
Growing companies shouldn't be making a profit because they should be limited by their ability to execute on attractive growth opportunities fast enough. Mature companies can make profits because they've reached the limits of their attractive growth and now can be focused on harvesting the rewards.
You can thank the SPAC (Special Purpose Acquisition Company) process for that. Nikola basically bypassed all of the normal scrutiny that's associated with an IPO by merging with a placeholder company that had already gone public. It's a really shady practice, and Nikola is a perfect example of what's wrong with it.
Yeah - I don’t see how SPACs are anything more than a way to dump a losing company on the public.
Supposedly it’s about giving founders certainty, but if the investors in the SPAC want to take the founder’s company public then they must think the price they’re giving them is under market.
Best interpretation of this is founders not wanting to deal with the hassle of an IPO (or preferably DPO) and are willing to take that lower price to avoid the logistics (which doesn’t inspire much confidence in the founders for me).
I suspect a lot these are just about grifting money from the public while passing off a dying company. Cashing out quickly for SPAC investors and founders.
Nikola in particular is basically fraud and going to zero, just hard to know when. I think it’s too difficult to make money with a short position, this biases the market to support this kind of failed company longer than it should.
Supposedly it’s about giving founders certainty, but if the investors in the SPAC want to take the founder’s company public then they must think the price they’re giving them is under market.
Best interpretation of this is founders not wanting to deal with the hassle of an IPO (or preferably DPO) and are willing to take that lower price to avoid the logistics (which doesn’t inspire much confidence in the founders for me).
I suspect a lot these are just about grifting money from the public while passing off a dying company. Cashing out quickly for SPAC investors and founders.
Nikola in particular is basically fraud and going to zero, just hard to know when. I think it’s too difficult to make money with a short position, this biases the market to support this kind of failed company longer than it should.
Galileo in HyperChange said that he called a broker just to know the price of borrowing Nikola shares, and they said that it's 200% APR if I recall correctly. It may have been direvtly after the merger though, I don't know the exact details.
You can actually look this up! IBKR provides SLB (stock loan borrow) rates for users, and someone made a site to report this data. https://iborrowdesk.com/
Briefly over 800%!
[https://iborrowdesk.com/report/NKLA]
[https://iborrowdesk.com/report/NKLA]
An amusing example of this: a pharma startup wanted to sell shares to raise money for drug development, so they bought a tiny Las Vegas concession vendor called Fun City Popcorn that was already public and then merged with them:
https://sec.report/Document/0001144204-05-032459/
I heard about this on 99% invisible:
https://99percentinvisible.org/episode/orphan-drugs/
I heard about this on 99% invisible:
https://99percentinvisible.org/episode/orphan-drugs/
I'm sure there's nothing wrong with a small concession vendor being a public company neither.
Sounds like I should just go to Robinhood and put all my money on it
Sounds like I should just go to Robinhood and put all my money on it
Why would it be wrong?
> An amusing example of this: a pharma startup wanted to sell shares to raise money for drug development, so they bought a tiny Las Vegas concession vendor called Fun City Popcorn that was already public and then merged with them
This is a reverse merger. SPACs, or blank-cheque companies, involve a reverse merger. But they’re a specialised case of them.
This is a reverse merger. SPACs, or blank-cheque companies, involve a reverse merger. But they’re a specialised case of them.
apparently this company’s product is its ability to extract money from unsuspecting investors. i feel bad for them but the world will be a little bit better when nkla (and their frivolous lawsuit against tesla) is gone.
Aren’t garbage trucks one of the best applications for electric driving in trucks? With the stop and go recuperating should save anlogt of energy.
I don’t think so. AFAIKR electric vehicles suffer from a rocket fuel and payload problem. The more weight you carry the bigger batteries you need. But maybe for short range it is acceptable. Would love to be wrong
Garbage trucks should be possible. They are heavy but no heavier than a semi truck, with a tiny fraction of the range (150 miles vs 500+). Plus, low speed city driving is much more efficient than highway driving with an EV drivetrain.
Do you have any thoughts on high torque repeated starts with a full load? This ain't city driving in a Prius. There's also a anti-rocket problem here in the vehicle is at its heaviest at it's highest battery depletion. Makes for some interesting problems.
Don't electric motors have their full torque at 0 rpm
Is there something particularly difficult about developing an electric garbage truck? All-electric cars and vans already exist, so it seems like simply a problem of putting existing technologies together in a new configuration.
Given that a typical garbage truck weighs 25+ short tons (https://www.reference.com/world-view/much-garbage-truck-weig...), it seems likely that you start to run into the legal limits for local roads.
E.g. in NYC (https://www1.nyc.gov/html/dot/html/motorist/sizewt.shtml), the max weight for any vehicle is 80,000 lbs, likely much less if you’re the length of a typical garbage truck.
Can you really go electric? A 2016 bullish Quartz article (https://qz.com/749622/the-economics-of-electric-garbage-truc...) says the typical garbage truck travels 130 miles a day. Unclear what the additional weight of a capable battery pack would be, even after accounting for the saved weight by removing what must be a pretty hefty combustion engine. It’s certainly interesting that the company (Wrightspeed) profiled in the article seems to be doing more than just garbage trucks now. Their Route 1000 powertrain/platform only quotes 24 miles of pure EV range (https://www.wrightspeed.com/the-route-powertrain), so it seems like there are certainly trade offs between range and weight regulations.
I imagine once long and medium haul trucks make it to market (perhaps Tesla or Volvo), maybe we can say we’ve reached the energy densities in packs that make hauling around weight equivalent to an 18 wheeler possible at a reasonable cost.
Other reasons that maybe no one has done this already:
* Garbage trucks cost $250k+ (https://bigtruckrental.com/front-loader-garbage-truck-rental...). I’m guessing there are regulatory requirements around collision safety, and maybe longevity requirements that become a factor.
* Given that a brand new sleeper semi goes for 50% less (https://youngtrucks.com/new-trucks/2020-volvo-vnl64t860-860-...), there are probably significant costs not typical of a combustion engine vehicle. Maybe those front loading bins require powerful pneumatics, or those on-vehicle compactors need to be able to exert tremendous amounts of force, and so on and so on.
* How large is the market for garbage trucks? Some press release claimed that the global garbage truck market in 2019 was ~$22 billion (https://www.globenewswire.com/news-release/2020/07/29/206925...). If we use a unit price of $250k (probably on the low end), that would mean only ~88000 total units sold globally. Of course, I’m sure different countries may have larger and smaller trucks, but you get the gist.
* The customers for these trucks are likely to be municipal governments and a handful of private waste management companies (https://craft.co/waste-management/competitors). I think it’d be a huge risk to build out a plant to put together a garbage truck, have maybe a few hundred plausible decisions makers to pitch on the product, and potentially risk burning hundreds of millions in capital between labor, regulatory certification, endurance testing, battery pack development, power train development, etc.
E.g. in NYC (https://www1.nyc.gov/html/dot/html/motorist/sizewt.shtml), the max weight for any vehicle is 80,000 lbs, likely much less if you’re the length of a typical garbage truck.
Can you really go electric? A 2016 bullish Quartz article (https://qz.com/749622/the-economics-of-electric-garbage-truc...) says the typical garbage truck travels 130 miles a day. Unclear what the additional weight of a capable battery pack would be, even after accounting for the saved weight by removing what must be a pretty hefty combustion engine. It’s certainly interesting that the company (Wrightspeed) profiled in the article seems to be doing more than just garbage trucks now. Their Route 1000 powertrain/platform only quotes 24 miles of pure EV range (https://www.wrightspeed.com/the-route-powertrain), so it seems like there are certainly trade offs between range and weight regulations.
I imagine once long and medium haul trucks make it to market (perhaps Tesla or Volvo), maybe we can say we’ve reached the energy densities in packs that make hauling around weight equivalent to an 18 wheeler possible at a reasonable cost.
Other reasons that maybe no one has done this already:
* Garbage trucks cost $250k+ (https://bigtruckrental.com/front-loader-garbage-truck-rental...). I’m guessing there are regulatory requirements around collision safety, and maybe longevity requirements that become a factor.
* Given that a brand new sleeper semi goes for 50% less (https://youngtrucks.com/new-trucks/2020-volvo-vnl64t860-860-...), there are probably significant costs not typical of a combustion engine vehicle. Maybe those front loading bins require powerful pneumatics, or those on-vehicle compactors need to be able to exert tremendous amounts of force, and so on and so on.
* How large is the market for garbage trucks? Some press release claimed that the global garbage truck market in 2019 was ~$22 billion (https://www.globenewswire.com/news-release/2020/07/29/206925...). If we use a unit price of $250k (probably on the low end), that would mean only ~88000 total units sold globally. Of course, I’m sure different countries may have larger and smaller trucks, but you get the gist.
* The customers for these trucks are likely to be municipal governments and a handful of private waste management companies (https://craft.co/waste-management/competitors). I think it’d be a huge risk to build out a plant to put together a garbage truck, have maybe a few hundred plausible decisions makers to pitch on the product, and potentially risk burning hundreds of millions in capital between labor, regulatory certification, endurance testing, battery pack development, power train development, etc.