Fate awaiting Teslas of the world

Matein Khalid
An asteroid collision with earth 65 million years ago created a mass extermination event that wiped out the dinosaurs. This is an apt metaphor for the monetary tightening of the Powell Fed in 2022 that wiped out so many emerging growth segments in Nasdaq, including several notable electric vehicle (EV) startups now on critical life support. Most wannabe Teslas all over the world are going to share the fate of old brontosaurus in a Darwinian shakeout that will continue for the next 5 years. The writing is on the wall for small cap EV, exactly as it was for cryptos, SPACS and meme stocks. The RIP chorus will only get louder with a decibel count that will be heard all over the planet.

Arrival (ARVL) and Faraday Future Intelligent Electric (FFIE) have already entered the land of the living dead where, as Elton John once said “Sorry seems to be the hardest word”. It is almost as if the entire half dead sector of corporate EV zombies are singing to investors “What do I do to make you love me? What do I do to make you care?”. Frankly, very little since Tesla is the obvious 800-pound gorilla in EV even though its shares have lost 50% of their value YTD. Arrival fell almost 40% in a single session after its management confessed that there was no cash in the kitty and losses exceeded Street estimates. FFIE, Canoo (GOEV) and Sono (SEV) will share the same predicament if they do not raise new capital, which seems a Herculean if not impossible task now.

I have more faith in Lucid simply because its Saudi sovereign wealth fund bellwether investor can pony up more cash if the $4 billion in his balance sheet runs out. Saudis cannot be thrilled with their ownership of Lucid since it has dropped more than 70% in 2022 but then the Saudis invested $45 billion in Softbank Vision Fund and Softbank has amassed more than $50 billion in losses in 2022.

Lordstown has a short me label written on it even though it has managed to raise money from its mega Taiwanese investor Foxconn. Other than Tesla, I would only consider buying Rivian (RIVN) though its pop since last week’s earnings and CPI euphoria in Nasdaq means its not worth $35 or a market cap of $33 billion. If it falls 30%, which is not impossible since the recession is yet to hit EV, I will do a deep dive on RIVN and hit the phones to speak to my old Valley buddies at Mount Olympus. In the investing world of the Gulf, we have no shortage of falcons but in the smart money pinnacles of Mount Olympus in Boston, there is only Raptor.

Rivian’s Q3 production guidance on the electric truck was a winner last week even beyond the 100,000 trucks ordered by Amazon. The only dark cloud in the Rivian story is the possible delay in its R2 vehicle platform but I do not see anything there that is not fixable and the cash pile now is a cool $14 billion. The ideal buy/sell prices for RIVN would be 25 to 50 but I doubt we see either extreme in the short run, so it may be time to consult the optionistas at Raptor.

Matein Khalid: Investor | Family Office CIO | Portfolio Strategist | Board Advisor | VC | Finance Professor

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Also published on Medium.