Wall Street is still trying to bleed retail investors. But they’re no longer all that eager to get bled.
By Wolf Richter for WOLF STREET.
In terms of my Imploded Stocks column, which has been getting longer and longer, this addition is special: When the tiny EV outfit Phoenix Motor went public on Wednesday, the shares [PEV] instantly kathoomphed into the void.
From the IPO price of $7.50 down to about $4.50 was just a void, and trading volume started below $4.50. Shares ended the first day of trading at $4.13, having plunged 46%. In early trading today, shares plunged another 10% and are currently a 3.66, down 51% from the IPO price yesterday. This is the chart by the minute of the now infamous first day:
To make the share offering more palatable to leery investors, the offering had been downsized to 2.1 million shares, down from 2.5 million shares still imagined the day before in the SEC filing, and the IPO price was set at $7.50, at the lower end of the $7.00 to $9.00 range indicated the day before.
With this IPO, Phoenix raised just $17.75 million, giving it a valuation of $150 million. That $17.75 million it raised comes in handy because in its S-1 filing with the SEC, the company said that it had only $66,000 in cash left over at the end of March. Which explains the desperation of the IPO. Because that $66,000 has likely been burned up by now.
In the S-1 filing, the company said that it had only $2.9 million in revenue in 2021, which generated a loss of $14.6 million. So the funds it raised might give it enough cash to operate for a little over one year at the 2021 burn-rate.
Phoenix has been installing electric powertrain systems into utility vans, trucks, and shuttlebuses that are based on the Ford E-350 and E-450 cutaway chassis that were originally designed for internal combustion engines. A few shuttle buses are used at the LAX Wally Park parking complex. The company has been doing this for years. These are essentially after-thought conversions of ICE vehicles into EVs.
Converting a chassis designed as an ICE vehicle is the costliest way of building a mediocre after-thought EV. Legacy automakers and startups are working on blank-sheet commercial electric vans and trucks, and that’s the competition going forward.
Phoenix says in a filing with the SEC that it is now working on a “ground-up chassis,” meaning its own blank-sheet design of an EV chassis.
But wait… That $17.75 million it raised in the IPO is not enough to design an actual EV from ground up, and ramping up manufacturing of an actual EV requires hundreds of millions of dollars, and more likely a couple of billion dollars to get volume production going. The $17.75 million the company raised in the IPO is not enough to do much of anything in the capital-intensive world of manufacturing.
The owner of Phoenix is an entity of SPI Energy, which acquired Phoenix Motor in 2020. SPI is a Chinese company, headquartered in Shanghai. It installs solar panels, among other things. The Chinese company set up an entity in the US, which then went public in the US on January 19, 2016 [SPI].
In the morning of the first day of trading on January 19, 2020, amid huge hype and hoopla, SPI’s chairman Xiaofeng Peng and his management team rang the opening bell of the Nasdaq. And of course, it was the opening bell of a process by which American investors got fleeced.
Amid all the hype and hoopla by which Wall Street investment banks are trying to lure retail investors into handing over their money, the stock spiked to over $170 on the second day, its all-time high, and then collapsed 99%. Today in early trading, it’s at $2.34
So, now that the blistering EV IPO and SPAC boom has been in full collapse mode for over a year, with many EV IPO stocks and EV SPAC stocks down 80% and over 90%, SPI needed to start unloading Phoenix while it still could, and they needed investors to come up with that $17.75 million pronto – really a lot more, but that didn’t work out because investors refused — to keep the company going long enough for SPI to unload the rest of it, and they needed to get this company out the IPO window that has already closed.
This misbegotten IPO might not set an absolute all-time record in terms of insta-collapses – I haven’t checked the history of IPO insta-collapses – but it sure was a sight to behold.
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My brother cancelled a Tesla order because he did not trust charging infrastructure for his long distance journeys. A supercharger charges for 200 miles in 15 minutes. Slower home 120v chargers require overnight charging for 40 mile journeys.
A Chevy Bolt EV costs $32,000. There is competition in the EV sector.
I’d consider an EV if a company would pay for my service upgrade from 100a to 200a and install a free 240v charger. And on top of that, when fast charging infrastructure is as ubiquitous as gas stations and when the aging 50 year old nuclear plants that are all past their initial licensing period in this country are upgraded to modern safe Gen 4 reactors to provide safe and clean power to the grid.
So, maybe ‘heck’ will freeze over before I become an early adopter.
Here in FL, FPL (Florida Power and Light) is offering a subscription service for the very thing you mention…
$38 a month and they will provide equipment for the charging…
Charging is no cost, off peak (outside of 12pm to 9 pm) , otherwise 22 cents per kWh…
After ten years, you own the equipment IIRC…
.22/kWh is more than double FPL’s normal residential rate. Plus $38/month. What a deal!
‘upgraded to modern safe Gen 4 reactors…”
And at which point they will be able to buy liability insurance on the open market, rather than relying on the last vestige of the Soviet Union here in America, The Price Anderson Act?
I think they recently cut the bolt ev price to about 27K as the subsidy is gone for that model.
The cut is $6,000 off new 2023 models. Any leftover 2022 models will be priced as before. Also, the 2023 models will “apparently” have a different and safer battery configuration.
Nothing was said about the local “dealer markup over MSRP” for the 2023 models. The new models are not available for a couple more months.
How to end up with a lot full of 2022s – price the newer model significantly cheaper. No way the ’22s are going to sell for full price.
Marketing 0, market 1.
They just dropped the price on the 2023 model to $27K
Batteries don’t like “fast charging”. The proper solution is a STANDARDIZED battery packs and cars designed for quick change of the chosen standard size and hookups.
Instead of going to a gas station you would go to a “Battery Shop”, where battery or batteries could be charged, inspected, maintained by professionals.
Instead of gas trucks on the freeway, there would be electricity routed to the battery shop just like any other industry.
You could still trickle charge at home using solar panels or the grid without any extra electrical work being needed, if you wanted, but that would be best for a class of small low speed 20-40 mi range around town cars…old Mini Cooper size. All many people need.
At my EV class, we played with a (pre-2012) Prius battery pack….it was about the size of a suitcase…cars could be set up to hold 1 to 10, depending on the owners travel plans, EASILY.
I’ve driven a 2020 Bolt EV 94,000 miles in less than two years while exclusively DC Fast charging it. Battery was 99% of brand new. Unfortunately someone totaled the vehicle at that point. I’ve spent $0 on repairs.
Wall Street loves narratives. Even Charles Ponzi had a narrative that was a real business concept, but it was impossible for his idea to be scaled.
Read a book a long time ago that at least at that time IPOs as a whole performed worse than the overall stock market. I think the book suggested waiting five years before considering an IPO as you need to let the hype get washed out of the narrative.
I remember Etrade used to let some of its customers in on IPOs during the tech bubble, and they would ask that you hold on to the shares for at least 3 days. I didn’t get asked again. I was out the same day.
Yeah. Not just over-hyped IPOs. The banksters now are recommending “buy” mainland Chinese stocks, before the final plunges —– from them, probably, LOL. If you are that gullible, they still have some left over subprime secured securities, bizzare NFTs, weird-puke-stain-like modern art created by artists less trained than my tired three year old,, and tulips. LOL.
BETTER to buy cacao beans, so you can at least make chocolate with them!
If they can’t sell shares to gullible investors like they used to, then these companies need to borrow to keep the lights on. Even 2% interest rates will create problems.
The narrative that “hey, they don’t make money but their stock keeps going up” is about to end.
Junk bonds often trend closely with aggregate stock prices, so crashing (IPO) stock prices probably = shut out of the credit markets too.
I worked for a company that built the truck bodies that went on Smith Newton electric truck chassis that would be used to deliver office supplies for Staples (they looked like Isuzu NPR/NQR cab-over trucks). This was about 10 years ago. What a cluster frack that was. Dead batteries and constant charging headaches. Staples found them to be nearly useless. Those delivery trucks were accruing way more mileage on tow trucks than they managed under their own power.
Sure, EVs have made some progress in the last 10 years, but I’m sort of stunned to see that the tech being used on Phoenix vans and trucks is pretty much exactly what was on the Smith chassis almost a decade ago. Similar driveline layout with basically the same batteries & electronics and similar hardware. Just based on Phoenix Motor’s website, their CEO is also serving as CEO or VP for 4 other companies concurrently. I’ll bet he has tons of time to put the attention toward Phoenix that the company deserves… Either he’s Superman, or he’s not really putting real work into all of these companies – Guess which option is more likely. Worse yet, Phoenix Motor’s products are just Ford E-450 van chassis hastily retrofitted with unimpressive EV drivelines. The options on range run from 60 miles (laughably useless) to 160 miles with their largest 156 kWh battery packs. I would be amazed if these vehicles actually deliver anything near their advertised range, especially carrying the loads that they will realistically encounter in commercial service.
EVs don’t scale well into larger gross vehicle weight classes and suckers really are born every minute. The fact that anybody is even putting a penny into this dumpster fire company is proof.
Not Sure. Do you know what the cost was on those 156Kwh battery packs?
How about electric transit buses? They’re burnin’ up real good lately.
Hey, it’s public money anyway, i.e. your taxes.
Wolf, how about an article on WHY the FED decided to goose equities and housing. If you’ve already covered this, mightn’t you please reference the text.
What made these two entities sacred cows?
Or why just America decided to goose stocks when no other country around the world did?
THAT finger on the scale gets the all-time idiot-incompetence award. That makes them fools or knaves. I think Depth Charge says both?
Liquidity, and the US algos were the best at front running, and going after shorts.
They were allowed to put their servers closest to the trading servers, and it made front running legal for a long time. They are finally getting around to correcting the thievery after over 20 years. The SEC recently made that decision according to Zero.
Middle class Americans (and up) have 401Ks and real estate. They pay taxes and vote. It’s not rocket science.
Phleep
‘Middle class Americans (and up) have 401Ks and real estate’
Define ‘MIDDLE Class’ by income and or wealth!
The top 1% own more than 50% and the top 10% own just over 90% of Wall St wealth and income stream
The bottom 90% have less than 7% of Wall St wealth
Where does it your ‘middle class’ belong in above group?
This is supposed to create the wealth efforts! When people get paper gains richer, they tend to spend more money! Since over 70% of our economy is reliant on consumer spending…
Wealth effect and trickle down theory are thrown around to justify, Fed’s loose monetary policies and efforts in creating the current ‘everything bubble ‘ since 2000!
Mr. Barnake claimed in 2014(?) that Russel 2000 chart proves that our Economy is strong! Wow! This is how Fed thinks about the Economy and equate with rising indexes! He forgot to mention ‘insane ‘ credit creation to bring that effect! Nor the Buy-back shares contributing to nearly 50% of rise in S&P since ’09
No wonder why we are NOW!
https://wolfstreet.com/wealth-effect/
The hidden costs of migrating to EV manufacture is starting to catch up with the hype. Maybe the EV makers are trying to discourage retrofitting. I am sure there are diy youtube videos of this already, and aftermarket kits. Kids putting them on skateboards. I would bet on American ingenuity.
Net zero is according to politicians supposed to be achieved in 28 years. I have listened to a lot of smart people say it is a 60 – 70 year project. I think there are over billion people in the world that don’t have electricity yet.
The world is a funny place. Europe going to have trouble heating itself yet useless crypto mining is gobbling up a lot of electricity. Gold miners wouldn’t be wasting so much fuel digging gold out of the ground if central bankers didn’t debase currency. Ultra rich are concerned about global warming, but fly around in 2 mpg jets between multiple mansions.
> Europe going to have trouble heating itself yet useless crypto mining is gobbling up a lot of electricity.
It surely IS useful — to money launderers, internet scammers, illegal drug and weapons dealers, child pornographers and traffickers ….
Not to forget state-linked actors like North Korea’s financier-hackers (building nukes!), and hit-men ….
Hit men like cash in unmarked small bills. Crypto is traceable.
Cash useful too, just impracticable because of denominations.
Would be hilarious if EU and USA just started printing 10k bills to kill crypto nonspeculative demand.
Do you prefer the government agents to rob you to the benefit of the oligarchs? At least crypto gives me a chance to fight the oppressor.
Cryoto gave someone else a change to become a billionaire and then unload it and buy Treasuries with the proceeds and sleep soundly.
Bitcoin currently at $25.6K
The oppressor is winning.
Frightening….All the bells and whistles of a rip off. Makes me wonder which PERS entities loaded up on this financial disaster.
😂😂😂😂
island teal wrote: ” Frightening….All the bells and whistles of a rip off. Makes me wonder which PERS entities loaded up on this financial disaster.”
My thoughts exactly. Who benefited ? With $2.9 Million in revenue and a $14.6 Million loss in 2021, who was telling their clients to buy into this??
When I looked a few minutes back, PEV stock was down another 50¢ to $3.59.
At some point, Wall Street won’t have any Muppets left to loot.
Talk about out-of-touch greater fools: those who
1) thought such an IPO would do anything but tank in present conditions, and
2) further down the scale, paid in that $17m. Huh??
Where are these wiling bag-holders? I want to:
1) meet them, and
2) sell them anything
For many of the financial giants, throwing a million or so at this turkey equates to froth at the top of a cup of Starbucks…
CALPERS has $500 billion under management… a couple of million here or there is a rounding error…
Not saying they invested, just an example…
If it makes money, great… if it doesn’t, meh…
Get it back to you on something else…
Junk bonds often trend closely with aggregate stock prices, so crashing (IPO) stock prices probably = shut out of the credit markets too.
DM: Two-thirds of corporate finance chiefs say recession WILL hit the US within the next 12 months and NONE believe the economy can avoid a downturn
A recent survey of chief financial officers found that most believe a recession will strike in the next 12 months, and none believe the US economy will escape a downturn.
It feels like it is starting now!
Atlanta Fed GDPNow forecast for 2Q is just under 1% today, been trending down. On the plus side, the chart resembles a perfectly soft landing.
I couldn’t quickly find prices for Phoenix Motorcar’s products or options. Assuming a low-ball average price of $130/kWh, you’re looking at over $20k for just the battery packs. In reality, since they are a niche vehicle upfitter (not really a manufacturer) that either arranges those packs into larger modules or pays a supplier to do so, they’re probably paying a lot more than that. At least $30k-$35k for installation-ready battery modules would be my guess (their cost). Besides that, they’re a small player, so they’re probably having trouble even getting batteries.
And remember that they are probably rating their milage based on the weight of an empty vehicle. Add a decent load to these work trucks or try to tow something, and range drops like a rock.
Oops, this was meant as a reply to DR DOOM.
Not Sure: Thanks!
This is an old and familiar type of business. Car dealers often ramp up to small-scale production, turning sedans into limos or convertibles, or hotrodding the engines, or electrifying the cars. These local businesses can be profitable, but nobody would ever think of trying to take them public. Modern VCs are remarkably ignorant of tech history and business history.
Yes. Back in the day, we had a business that put front-drive axles on medium-duty and heavy trucks for the oil field, and also on vans. We even exported a bunch of them to Saudi Arabia (1970s, before my time). Those trucks were real beasts.
No way that we ever thought of doing an IPO with this business. But those were different times.
The investment bankers who framed this must be pretty desperate for business too. Don’t they get paid a percentage of the upside?
No worries though, the corporate auction blocks should be spilling over soon with companies for sale. Smart and cash-rich businesses can cherry pick their buys there.
Assets for sale may be the mantra of the coming times.
Why would any body want to buy this heaping pile of failure? They don’t appear to have any valuable IP. As far as I can tell, their “Corporate Office” is maybe a few sublet rooms with a mailbox at NMC Aerospace in Anaheim, CA and their operation as a “Car manufacturer” is basically a garage in an industrial park in Chino. Phoenix Motorcars doesn’t appear to have any business being a publicly held company, much less an operation with a future worth buying.
It just boggles my mind… Don’t investors have google maps? Wouldn’t an investor at least want to see the grand corporate offices and impressive manufacturing operation behind their “investment” on street view before they dump money into it? People will spend hours looking for the best gas price by a few cents, but they’ll throw a $1000 into the IPO slot machine without even looking at a company’s website.
Not Sure,
Being a motorcycle rider, I was intrigued by a three wheeled car called the Elio when it started to be hyped back in 2015. It was supposed to get a 85 mpg and was priced at just under the 7k.
Their corporate office was in Phoenix, AZ and their manufacturing facility was a shuttered GM plant in Shreveport, LA. On a motorcycle trip to Arkansas, a friend and I decided to take a ride down to Shreveport to check out the production.
The only evidence that Elio had a connection to the assembly plant was a canvas sign over the old GM sign. We talked with the lone security guard who told us nothing had been happening at the plant since it had shut down.
Their stock is still traded under the symbol, ELIO.
Nice. That is what we call, “Due diligence.”
Wow, Mr. Romig is absolutely right… THAT is due diligence!
And it may be a very good thing that you took that detour on your ride. ELIO stock spiked up around $40 near its IPO, then quickly collapsed down to around $20, then lower. Today, it’s $0.68 per share, which is still wildly overpriced.
What a wonderful illustration of the smoke & mirrors game we call, “The Stock Market.” Thanks for sharing your experience.
**
” got$ what vester boyz want ( curls forefinger…)
“Vester Boyz want what I got$ (tee hee!) SUCKERS!!!
“Naa na naa na na .. Naa Na Naa Na Naa! (Na = Not Available @ any price!)
**To any Waitresses out there, I apologize.
Wolf, can you please make these graphs with zero at the bottom? Obviously anything can look like a kathoomph if you jigger the axes.
Good grief.
The percentage drops are not that hard to decipher.
-46% in the space of an hour doesn’t draw a clear enough picture for you?
MarMar,
This chart was from YCharts, in their standard format for presentations. My charts of kathoomphing stocks go to zero.
Your font changed. I hate it. Maybe you’ll revert it.
Switched to a Web Safe Font to speed up page load times. The font I used wasn’t in the browsers, and to render the page, they ended up having to download the font, which takes a while and during the process the page moves around. And if browsers don’t download the font, they just use a font that they have, which can produce bizarre results that I cannot control. Every browser has this new font.
However, I’m still working on making the headlines bold.
I never had an issue on several browsers and devices. This new font is not very crisp and plays with my astigmatism. Big mistake!
This font is Arial, the most common font out there.
OK, I switched the font for the text back to the old font, and I’ll see how it goes. Turns out the problem with font moving the page during rendering was mostly due to the beautiful bold special font I used for the headlines. I loved that font for headlines, but that needed to go.
You can persuade a browser to use any font you insist on, if you really care about such things. Wolf’s writing is so classic that I read it in a font that looks just like Thomas Jefferson’s handwriting in the Declaration of Independence! *
“When in the course of human events, it becomes necessary for the Federal Reserve to raise interest rates, tighten financial conditions and crush asset values to stop a raging inflation, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation of people from their former Net Worth…”
* just kidding. The new font will take some getting used to, but at least Wolf is still going strong on his righteous-market-writer thing. Could be worse, y’know?
I have to admit I also miss the old font…
Good grief.
🤣
Will the underwriter lose money or only reputation? Do they have to buy a certain amount of stock to launch an IPO?