Why has ride stock dropped 86% since September?
Since September, RIDE stock has lagged other high-flying electric vehicle stocks, dropping 86% through October. Even after a robust post-election recovery, its shares are still 20% below their peak. Meanwhile, other EV startups like Nio (NYSE: NIO) and Li Auto (NASDAQ: LI) continue to rocket upwards.
What happened to Lordstown Motors’ ride stock?
Last September, Lordstown Motors (LMC) (NASDAQ: RIDE) (before it was trading as RIDE stock) took a field trip to the White House. The electric pickup truck startup was riding high on publicity from President Donald Trump’s administration for reopening an Ohio General Motors (NYSE: GM) plant.
Will Steve Burns fail investors with ride stock?
CEO Steve Burns has failed investors once before. It looks like more of the same with RIDE stock. Last September, Lordstown Motors (LMC) (NASDAQ: RIDE) (before it was trading as RIDE stock) took a field trip to the White House.
Can DiDi’s stock recover?
Even if DiDi delists its shares from the NYSE and relists them in Hong Kong, it still needs to relaunch its domestic apps, fend off its competitors while facing tighter regulations, and brace for a big antitrust fine. If DiDi withstands all those challenges, its stock might recover.
What Happened With RIDE Stock
What It Means
The morning’s news brought a noticeable spike for RIDE stock, which is currently trading up 8%. This comes after Lordstown drew some short interest last week.
Why It Matters
This deal makes a lot of sense for Lordstown Motors, a company operating in a booming market but still clearly needs the cash to continue scaling operations.
What Happened With RIDE Stock
As Lordstown moves forward with the production of its highly touted EV, its Endurance pickup truck, a cash influx will be vital. The company has an opportunity to get one of the first EVs in its kind to U.S. markets but only if they can do so before competitors.
Why It Matters
According to a joint statement, Foxconn acquired $50 million of common stock at $6.90 per share. As a result, Foxconn will now make a down payment of $100 million on the factory by Nov. 18. Then, it will make two payments of $50 million each in February and April.
RIDE Stock Step No. 1: Hide Your Old Sins
Providing Lordstown Motors with an immediate payment is critical. That is because, following a short-seller report alleging that it was faking preorder numbers, RIDE is under investigation by both the U.S. Securities and Exchange Commission and the Department of Justice.
Starting Over with More of the Same
Investors thumbing through Lordstown’s investor presentation will see typical Wall Street fodder: projections of massive revenues, a vast untapped market, and a smiling set of manager headshots with 25, 35 or more years of experience each.
Step No. 2: Inflating Success and Failing to Deliver
American investors are known for giving second chances. And for a good reason: company founders from Henry Ford to Bill Gates failed at their first ventures before trying something different. Bill Gates stumbled with Traf-O-Data, a company that read traffic data from paper tapes, before changing direction and starting Microsoft (NASDAQ: MSFT ).
Step No. 3: Selling Pickups to Wall Street instead of Main Street
A colossal failure of Workhorse came from overpromising and under-delivering. And at LMC, Burns continues this pattern in the second step of his “do-si-do.”
Can Lordstown Keep Dancing?
In the final step of the “do-si-do,” Lordstown swings back to its old dance partner: Wall Street suckers.
Will RIDE Stock Succeed?
In LMC’s defense, its management has tried its hardest to keep investors happy. In October, the company released a video of the Endurance pickup dragging a Ford F-150 Lariat across wet grass. And in November, they announced they upped their estimate to 50,000 “non-binding production reservations.”
NYSE: DIDI
Investors looking to short Lordstown might still want to think twice. Shortable shares are supremely hard to come by, and fee rates can top 97% for these hard-to-find shares. (Note: if you own RIDE stock, make sure your brokerage is compensating you for loaning shares out).
China's ride-hailing leader is headed back home
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
1. Going private at a discount to its IPO price
DiDi Global ( DIDI -5.40% ), the largest ride-hailing company in China, plans to delist its shares from the New York Stock Exchange and pursue a new listing in Hong Kong. The announcement, which comes less than six months after DiDi's initial public offering (IPO), shouldn't surprise investors.
2. Retreating to an OTC exchange
Over the past few years, many Chinese companies that initially went public in the U.S. took themselves private before going public again on Chinese exchanges at much higher valuations. The deals couldn't be blocked because the management controlled most of the votes, and U.S. investors were often forced to sell their shares at steep discounts.
3. Swapping ADR shares for HK shares
A less painful option would be for DiDi to relist its shares on an over-the-counter ( OTC) exchange. That's what Luckin Coffee ( LKNC.Y 0.00% ) did after it was delisted from the Nasdaq last June. Luckin's stock had dropped below $2 per share at the time after its fabricated sales figures were exposed, but it now trades at about $13.
Should investors still hold their shares of DiDi?
In its press release, DiDi claims its ADR shares "will be convertible into freely tradable shares" in Hong Kong after it relists the stock.
Premium Investing Services
DiDi's investors might be reluctant to sell their shares at their current reduced prices, since the stock now trades at less than its estimated revenue this year. However, the stock should remain cheap for a very long time.
