The Consensual Hallucination that drove the EV SPAC mania didn’t die with the EV SPACs; it moved on to other stocks.
By Wolf Richter for WOLF STREET.
Nikola, the “legendary” maker of fuel-cell electric and battery-electric class-8 trucks that had gone public in June 2020 via merger with a SPAC, finally filed for chapter 11 bankruptcy today, as long expected, and intends to liquidate by selling its assets through a bankruptcy auction. It’s “legendary” because:
- Founder and CEO Trevor Milton was sentenced to four years in the hoosegow for lying to investors about the company’s technology;
- It settled fraud charges with the SEC for $125 million;
- Its stock price had given it a valuation of over $28 billion shortly after it went public in a fantastic display of what we have come to call “consensual hallucination;”
- It has lost $3.36 billion since 2019 in ever larger annual increments, on essentially no revenues.
And this long show, produced so elaborately by this outfit, which still calls itself “a global leader in zero-emissions transportation and energy supply and infrastructure solutions,” is over. The stock has long been just about worthless, and became worth even less today, (-40%), to $0.46, adjusted for the 1-for-30 reverse stocks split in June 2024, where each 30 shares became 1 share:
The company today said that it has $47 million in cash on hand, down from $202 million at the end of Q3 on September 30. In Q3, it lost $200 million. For the three quarters in 2024 so far it lost $482 million. In 2023, it lost $800 million. Since 2019, it lost $3.34 billion. It was very good at producing huge losses, we can say that for sure.
As if to add some dry situational humor, in August 2022, Nikola, whose shares by then had already collapsed by 92% from their peak, acquired collapsed EV-battery maker Romeo, which was supplying batteries to Nikola. In the press release back then, Nikola said:
“Integrated commercial vehicle electrification platform is expected to lead to manufacturing excellence and expected annual cost savings of up to $350 million by 2026; reduce non-cell related battery pack costs by 30-40% by the end of 2023.”
You see, the outfit has never once run into a shortage of bullshit to dish out to investors. For the few companies that bought its trucks, Nikola will provide direct service through March 2025, so about another six weeks. And then maybe someone else can step in, please? In the press release today, it said:
“Subject to Court approval, the Company intends to continue certain limited directly provided (non-dealer) service and support operations for trucks currently in the field, including certain HYLA fueling operations through the end of March 2025. Thereafter, the Company will need one or more partners to support such activities.”
EV SPACS that are no longer twitching:
These EV SPACs we have amused ourselves with for the past four-plus years, as one after the other were inducted into our pantheon of Imploded Stocks, were born during the era of free money and what we’ve come to call consensual hallucination, and reality just didn’t matter. Then they started collapsing and filing for bankruptcy, one after the other.
Electric Last Mile Solutions filed for bankruptcy in June 2022, only 12 months after it had gone public via merger with a SPAC. This was kind of a record.
Proterra, which produced a few electric buses, filed for bankruptcy in April 2023, 25 months after having gone public via merger with a SPAC. It once had a market cap of nearly $4 billion.
Lordstown Motors, which tried to make electric pickups, filed for bankruptcy in June 2023, less than three years after it had gone public via merger with a SPAC, during which time it lied to investors to get more of their cash and stay alive.
Fisker filed for bankruptcy in June 2024. It had gone public via merger with a SPAC in October 2020 amid fake promises and ludicrous projections, and then burned $1 billion of investor cash to have some EVs manufactured by contract manufacturer Magna Steyr in Austria. CEO Henrik Fisker had already driven his predecessor company, Fisker Automotive, maker of the plug-in hybrid Fisker Karma, into bankruptcy in 2013.
Lion Electric, a Canadian company that made electric trucks and buses, filed for creditor protection in Canada and for chapter 15 bankruptcy in the US in December 2024. It had gone public in the US via merger with a SPAC in November 2020.
Canoo, which lately called itself a high-tech advanced mobility and energy company, filed for chapter 7 bankruptcy in January 2025 and shut down, four years after it had gone public via merger with a SPAC in late 2020. In 2024, it had joined the corporate exodus from California to Texas. It designed some electric vans but never sold any and died with zero revenues in Texas. But before it died, it bought some of the assets of bankrupt EV maker Arrival in the UK.
EV SPACs that are still twitching…
Faraday Future Intelligent Electric [FFIE] issued a bankruptcy warning in May 2024 and withdrew its production forecast. It had gone public via merger with a SPAC in July 2021. Among other things, it became legendary for imposing mega reverse stock splits: In August 2023, a 1-for-80 reverse split, where each 80 shares became one share; in February 2024, a 1-for-3 reverse split, and in August 2024 a 1-for-40 reverse split. In total, 9,600 shares became 1 share. These things are just a bad joke:
Mullen Automotive [MULN] had gone public via SPAC merger in November 2021, and has lost $2.1 billion since then, with no revenues to speak of, other than selling a few imported Chinese vehicles early on. In April 2022, short-seller Hindenburg Research came out with a report that said, “Mullen Is Among the Worst EV Hustles We’ve Seen in A Crowded Field of Contenders.” After some whoppers of reverse stock splits, including another one a week ago, which became effective on February 18, there’s essentially nothing left, and the whole thing is a joke.
VinFast Auto [VFS], a Vietnamese EV maker that’s part of the conglomerate VinGroup, went public in the US via merger with a SPAC in August 2023, with a minuscule float, and the shares of this misbegotten creature then exploded giving it briefly a market cap of over $230 billion. But two months later, the stock had plunged 92%, becoming one of our favorites in the pantheon of Imploded Stocks. They’re currently at $3.82, down 96% from the high. Its market cap has imploded from over $230 billion to a still ridiculous $9 billion.
Lucid Motors [LCID] went public via SPAC merger in 2021. Ayer Third Investment Co., an affiliate of Saudi Arabia’s Public Investment Fund, has invested $6.4 billion in Lucid, including $1 billion in March 2024, and owns 64% of it. Lucid has lost $10 billion since 2020, but it actually makes and sells higher-end EVs that are well regarded, and can be seen out in the wild.
Polestar [PSNY] went public via merger with a SPAC in June 2022 and started trading at $11, giving it a market cap of $23 billion. The stock is now at $0.21, down 98% from the peak. The company is majority owned and controlled by Chinese giant Geely, which had bought Volvo, which had bought a startup that became Polestar. All the vehicles were made in China until late 2024, when the company started manufacturing the Polestar 3 at its factory in South Carolina.
Rivian is not part of this lineup because it went public via classic IPO, not SPAC merger, in November 2021. In trying to ramp up mass-production, it has burned through many billions of dollars, but has three models – a pickup truck, an SUV, and a deliver van – that are well regarded and can be seen in the wild.
It started out with Amazon as one of its backers and huge customer for its commercial vans. It has now made a deal with Volkswagen that’s bringing in more cash. Today, shares [RIVN] trade at $14, down by 93% from its peak in November 2021.
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So, question: Would it be nuts to invest in Rivian or Polestar at this point since they appear to have viable products?
Having a viable product is only part of it. One of the other parts will be the equation of mass production: will they be able to ramp up production and sales to where sales volume is high enough to bring per-unit production costs down to allow them to break even BEFORE they run out of money.
All these EV makers have the same problem:
It takes a huge amount of money, engineering expertise, and management expertise to start up an automaker, design vehicles, build a factory, develop the supply chain, and ramp up mass-production of high-quality desirable vehicles, and then sell them in such large numbers – hundreds of thousands of vehicles a year – and at a high enough a price that the company can become cash-flow positive and survive on its own without further cash injections.
It took Tesla over 10 years and about $20 billion to get there, and it has been profitable ever since. The Model Y is now the #2 bestseller in the US of all models. So Tesla made it (if Musk doesn’t screw it up).
So the question will be if Rivian and Polestar – and Lucid for that matter — will have enough access to capital to burn in order to fund their growth. If they cannot ramp up substantially, they’re done.
So this would be a bet for the not-faint-of-heart.
In order to keep the gravy train of investment money going long enough apparently you need a CEO that is a charlatan, huckster, supreme bullshitter and egomaniac all rolled into one. And probably at some point the board needs to sh!tcan that CEO because those same traits, once the company is established, will run it into the ground.
I think you nailed it, LOL
Perhaps you neglected the importance of easy money, the grease that lubricated this contraption. The absence of a risk premium, the purpose of the positive interest rate discipline.
“Another one bites the dust
Another one bites the dust
And another one gone, and another one gone
Another one bites the dust.”
The EV industry is like a pie crust…crumbling into oblivion.
Lucid’s CEO, Peter Rawlinson, is one hell of an engineer. He was ‘Chief Engineer’ of Tesla’s Model S, and prior to that he was at Lotus and Jaguar.
The Lucid Air Sapphire is an amazing machine in every aspect of performance and sophistication. It’s also around $250k. Not a candidate for taking a large market-share; but it’s perhaps the best sedan one can buy today — regardless of price.
Wolf is right in his reply above about production costs and “the equation of mass-production.”
“I learned in business school 40 years ago, and it’s still true today: the low-cost producer wins. None of these EV startups will survive if they cannot get their production costs down. That’s where the battle is.” -Wolf Richter, 31 March 2024
And smart enough and driven enough to get it done. Musk has his (major) faults but at least give him his due, too.
Who is going to out compete BYD? Tesla? Sales are declining.
Rivian actually makes decent trucks from the sounds of it
And I see tons of them on the street, alongside their electric Amazon vans
I personally like em, and with amazon’s almost 1/5 ownership I’d say they are in a good position
Question is how long it’ll take them to become profitable
You would be betting on not just the company to design vehicles that it can sell in high volume for a profit; but also betting on the existing backers of those companies to keep injecting cash until they reach that volume.
FWIW, I’d put Lucid ahead of the other 2 on that list, because it’s largely funded by Saudi Arabia, and they have both the cash to keep the lights on a long time, but also the will to spend that cash in pursuit of vanity projects like this.
The field seemed so glam back then. If the stock was EV, take off!
Wonder what it is today. Someone has said 2025 is when AI has to produce real returns from its use, not from the run up in the stocks. Those savings or earnings will have to be big to justify anything like the stock prices.
Total investment in generative AI now a trillion dollars.
What do EVs do? They move us around. What will AI do that is that important?
Idk if this is a joke or if you’re actually serious
AI is seriously disruptive
Once companies figure out to train AI on their datasets and documents, they’ll be able to accomplish with 5 people what 10 currently do
And that’s just me extrapolating from my company..
It’s going to make productivity skyrocket once again
All the tech support I recently dealt with — including one today with one of the software service suppliers I use for this site — were with AI, and I have to admit, far superior (they nailed it instantly) to the people in Bangladesh or Pakistan that you have trouble communicating with. Those jobs (and wait times and aggravation) are history.
But note, this wasn’t Google’s dumb search AI, but company-internal AI trained on that company’s technology. I’ve given up asking Google’s AI technical questions because you get an answer with 100% confidence and it’s likely a hallucination.
I’ll put in a request on behalf of Wolf for his AI assistant to have a Bangladeshi or Pakistani accent, so he won’t miss the old days too much. A little added AI nostalgia as a bonus. “Hello Wolf, this is Raj.”
No extra charge, Wolf. A free benefit, “just for you.”
In terms of software development, which was one of the big reported use cases for LLM-based AI, studies at companies have shown that while AI increased initial code submissions, the final code commit productivity increase (so, code that makes it into the final code base) was essentially zero. The code was 40% bugs on average.
As a software business owner, I would love it if AI could replace programmers. Unfortunately, I also understand software development, so I’m forced to live in reality. Companies that believe they can replace developers with AI should probably first test AI out by replacing management with autocomplete. If it doesn’t work out, it would be less of a loss and more easily replaceable.
What I don’t understand is how there are any developers in the US available to replace. I was constantly told in the 2000’s that by 2010 all development jobs would be outsourced and no one should learn development. Sounds familiar.
I don’t doubt it’s investable, I just think the T word gets thrown around a lot, so we forget how big it is. Note that entire US auto debt is 1.6 T.
I also remember AOL buying Time Warner, with its stock.
A year later the merged co had written the AOL part to zero and removed those letters from the name.
Of course the Internet was here to stay, but this investment was too much too early.
Well the stock market is setting records against the glow of an inflationary backdrop that hatches jobs. What could go wrong ?
Inflation could become un-anchored from of it’s current perch of 3 pct toward the more realistic 5 pct which is statistically just as likely as 3 pct.
I’d wait several years until this anti-environmental wave turns around.
Meant as a response to Nick Kelly.
The EV and AV mania are closely intertwined. Many AV companies have gone under. The AV industry has similar problems as EVs, especially those that wish to operate their own fleets.
Waymo is the only one hanging on and they are likely burning billions
Waymos are all experimental vehicles that were purchased years ago from Jaguar as human-driven vehicles and were retrofitted for AV use. They can still be driven by a human. Waymo is about AV software and data, which it is trying to perfect. Waymo is in the developmental phase of AV tech, and if it succeeds, which it looks like it might, it can license the system to whoever and make lots of money from subscriptions.
I was in San Fran a couple of weeks ago and rode in Waymos like 10 times. They worked brilliantly. One even got out of the way of a tractor-trailer trying to squeeze by. If they ever make it smaller town Florida, I’ll never buy another car again,
Oh, the joys of “consensual hallucination” times! Like, “we’re all going to be RICH!” or rather, I and my in-on-the-secret fellows will be, so all you fools, enjoy being poor! I recall acquaintances who (1) quit jobs to day-trade in 1999, (2) talked royally at a neighborhood barbecue about their startup wine business funded with their second trust deed in 2005, and (3) all the smarties who used to post here, in the last go-round! SPACs — what a brilliant idea — we can just publish extravagant projections of dazzling riches with no factual basis, and skip that silly IPO. Bingo, levitating perpetual motion machines! (See origins of word “bubble” circa 1720.) May we see more such giddy times.
There still appears to be plenty of consensual hallucination left in the Crypto sphere. So we have that to look forward to.
Almost makes one think the supply of dollars for questionable investments is excessive. The FFR doesn’t seem restrictive.
…recall the century+ old ‘murican verities: “…there’s one born every minute…” and “…never give a sucker an even break…”.
may we all find a better day.
I am waiting for the scads of little AI widgets I see, and their startups, to reach a similar extinction-level event.
I have been using “https://www.perplexity.ai” for a couple weeks. It is an ai-powered search engine. I have been very impressed.
What exactly did the ai-powered search engine that improved your life actually do or recommend.
Robots work for us not the other way around.
Unless, what is the point of the Constitution.
I’m a firmware engineer. I had some code that I needed to understand. There were a bunch of function calls to a library that I was not familiar with. I used perplexity to tell me what the various function calls from the library did.
Here is one of the commands from the code:
fwhash = hashlib.sha256(firmware_bytes).digest()
And here is what perplexity told me:
“hashlib.sha256(firmware_bytes)”
creates a SHA-256 hash object
and updates it with the contents of
‘firmware_bytes’.
The “.digest()” method is then called on the hash
object, which returns the hash as a string of 32
bytes (256 bits).
Using a different flavor of AI, supplied by my default search engine, what I basically noticed is that AI answers aren’t all that different from the intro sentences from the first 4 or 5 *search engine results*.
Prettied up and neatened a bit but basically still just a mash up of the top bits of search engine results (which, once you strip away a lot of the LLM mumbo jumbo, makes a lot of sense…).
Okay tool, I suppose – but in and of itself worth hundreds of billions in incremental capex spend?
Business historians have seen all this before. A hundred + years ago, there was a similar explosion of companies making automobiles that now, no one knows the names of. My father-in-law’s father had a car that ran on kerosene. He once told me the name of it but I have now forgotten. The only one I can remember right now is the Pierce Arrow. Nash, Packard and Studebaker lasted longer than most. A lot of them were consolidated into General Motors. In another hundred years no one will be able to name any of the current list of EV builders, Tesla probably included.
Radio companies too.
Chemistry has a few tricks up it’s sleeve in the frontier industry of energy intensity, batteries.
The next generation of energy storage will make solar energy profitable.
It was the relentless pressure of Ford that forced them to combine into GM
What would have to happen to Tesla that it would be forgotten? unfortunately for you that you do not understand their business Tesla might be the most valuable company on the planet, and I am not blovating. They are in AI, battery storage, Robots.. factory building for themselves snd probably for others, supercomputers and robtaxis, as an aside, they make great electric cars.
88% of Tesla’s revenues come from selling cars and financing them. The rest is a sideshow. Waymo is two years at least ahead of Tesla with robotaxis. And everyone has AI, even the Chinese, for less, open-source even.
Will Tesla be the next to see an 80% drop with sales flat and P/E around 160?
Can anyone explain the value proposition of robotaxis and robots? How big is the market? What will margins be given Waymo and many Asian competitors?
It would turn Tesla into a returnee to the Imploded Stocks pantheon. It had already dropped 75%, after which it was inducted into the Imploded Stocks the first time in late 2022.
I think that Wolf’s estimation of what is Tesla worth as an automobile manufacturer rather than an overpriced, aging growth stock was solid.
Wolf,
An inconsequential correction:
Canoo sold at least three of
their vans to NASA, for use
as “Astromobiles” to shuttle
astronauts around the launch
pad for the SLS/Orion rocket.
J.
——————————————–
Of course, as car manufacturing
volumes, you might rightly argue
that three rounds to zero.
Those were handmade prototypes, not production models.
Keep an eye on the Urban Air Mobility “flying taxi” companies. I suspect they will be next. Archer Aviation, Joby Aviation, Lillium, etc.
Finally!The Jetsons!
What is sickening is that Trevor Milton sold hundreds upon hundreds of millions of dollars worth of NKLA stock while under indictment for fraud. Why those assets weren’t frozen pending outcome of the case, is beyond me. He ultimately was found guilty and sent to prison for 4 years (vs the 11 years that was being sought) and will be out in 3 years with hundreds of millions in the bank. While the shareholders got slaughtered. Also, NKLA won a $165 million clawback from Milton, to cover the $125 million SEC fine associated with the fraud. However, the SEC is listed as a creditor in the bankruptcy, to it appears they never colllected from Milton, and the SEC never got their fine, and never will. Why can’t him making good on the money owed to NKLA be a condition of his release from prison? Milton will re-enter civilian life with a few hundred million that was stolen from duped shareholders. Oh, and he still has the $32 million riverfront ranch near Park City, UT that he purchased with his ill gotten gains. So he’ll have quite the pleasant life awaiting him. I guess crime does pay.
Correction: crime pays for the upper class.
He’ll probably serve only a year of that sentence, that’s how it typically works, but those legal judgements against him will have to be paid, and his 3 Billion in net worth in 2020 is probably close to zeroed out given that his fraudulent company is bankrupt. He’s still got some massive fines to pay.
He has already served 16 months of the four years. And did you actually read my previous comment? He sold several hundred million dollars in stock the past several years. His wealth certainly is not ‘zeroed out.’
Gold has a role to play if you are running a big scam that could hit the fan. Just remember where you buried it.
Winter’s duplicitous beauty, a nemesis of the old and a playground for the young.
Asset markets are always jittery when a new plateau of sustainable asset pricing has been attained and sustained. I think both your inferred and stated conclusions concerning this example of hyper-financialization, ie greed.
Additionally
Wolf,
For my two cent’s, before pennies go bust
This is one of your best articles in some time.
Wait till “consensual hallucination” hits the big boys stocks.
Can one say “timber” ?
Thanks again for the reality check
If I understand Kelton’s conjecture correctly, the decision to maintain a positive interest rate is costing the USG half a trillion dollars per year.
The deficit was legislated by same the fools that have been in power this past 50 years. Now they’re going to solve the problems they caused.
In favor of the kernel. The everyday bloke. As much chance as a snowball in hell
QE by any other moniker, MMT included, has a feature that maximizes asset price inflation, the native cause of consumer inflation.
Also, the half a trillion the Fed is paying the criminal banks to hold their QE inflated reserves and not unleash them into the wild. The abundant reserve policy that makes markets easier too control.
Don’t forget all the fake alternative energy companies pimped by Vinod Khosla and bill gross like kior and energy vault, complete junk foisted on the public to make them richer
Wolf-
Is the cannabis industry ripe for picking as the subject of one of your fallen-industry articles?
So much promise a few years back for weed farming enterprises.
Not like you need one more topic to follow, but it might be fun and instructive…
Oh goodness, we did that years ago. Here are a couple:
June 2023:
https://wolfstreet.com/2023/06/22/how-can-a-company-lose-3-3-billion-on-402-million-in-revenues-cannabis-companies-show-how-as-their-shares-get-wiped-out/
March 2020:
https://wolfstreet.com/2020/03/10/the-collapse-of-the-pot-stocks-refreshingly-its-not-covid-19s-fault/
2018, Oct, I think, I wrote a bit for WS predicting the collapse of the pot stocks. This was before they did. Canadian darling Tilray was valued in the billions, about the same as Clorox Bleach.
The piece was titled: ‘Pot stocks soar as pot prices plummet’
After reading this article, it amazes me the total lack of foresight or imagination on the part of the legacy automakers. How hard would it have been for GM to start up an EV maker give it a charismatic CEO with some engineering knowledge, invest some early cash in said company then release it into wild, collect investor cash, and boom they can have a full EV production line with little or no monetary investment on their part. Worst case they sell off the part ownership for a profit.
boikin – think prior poster-child Sears&Roebuck. The contemporary and general, massive corporate-management focuses on next-quarter earnings, coupled with: ‘not invented here’/’forget what we invented’ here/’why invent anything?-just tout the meme&sell the stock’ corporate cultures. And, while we’re at it, take any of those pesky, weekly SWOT-analyses we may have had lying around behind the building and put ’em in the dumpster, willya?
may we all find a better day.
Good to see your emails coming in again Wolf
Vangard is the largest holder of Supermicro due to passive investing, it being the best performing stock of the S&P500; it might be delisted in 5 days. Blind investing.
Wolfstreet ensures a day of enlightenment.
I’m starting to see a noticeable number of Rivians in Dallas. I used to see them on occasion, but they are all over the place now.
Since 2000 we’ve seen a series of massive expansions and contractions of credit. One of the symptoms of so much money sloshing around is misallocation of capital. Uber for me is a great example. It’s a great service and I use it, but every trip I take consumes someones capital. There seem to be lots of examples like this.
The longer we put off a recession painful enough to liquidate all of this dead investment, the more difficult recovery will be (if it’s possible). At the same time, do I really look forward to the pain for myself or my children and friends and fellow Americans ?
This looks like the early decades of automobiles with hundreds of manufacturers making cars and markets deciding who makes them best. I have no doubt EV’s will get to at least a majority’s share of vehicles on the road. They’re just unbeatable in terms of convenience, maintenance, and running costs as commuter vehicles which most consumers appreciate. You just can’t beat having your car “refueled” while you sleep and not having oil change appointments.
They’re not quite a full replacement though. I’m thinking long-haul high-power, and enthusiast vehicles will remain diesel and gasoline for a while.
Nikola is a cautionary tale. I was in software developkent for 40 years and this is a case of vaporware. They lied about their product to get investors on board then sold only a handful of vehicles before realizing they did not have the money to continue the operation. That’s just a bad business model. The technology is there, but the business acumen to make these products is missing except for Tesla, which also lost money for many years. Tesla does have a working class-8 tractor which is being used by Pepsi. In Eiurope, Volvo and VW are working on class 8 EV trucks. We can hope that these are successful since electricity is a renewable resource. Cheers.