theStreetFika: Scones, Sips, Strategy & Stocks

This week, the SEC announced that Volkswagen is being investigated over its “Voltswagen” April Fools debacle. So what happened? Voltswagen was the actual new name (for about 24 hours) that automotive giant announced for their US subsidiary on March 31st, in a bid to promote the company's renewed focus on electric vehicles and its new all-electric SUV. Initially leaked as an upcoming April Fools joke, the name change was later confirmed on official VW corporate channels, before company spokesman Mark Gillies said on Tuesday that the statement was indeed an early April Fool’s Day joke. For a company found guilty of lying in a big way about emissions (Dieselgate), this was a high-risk gag with poor delivery. Joke or not, VW is very serious about its ambitions for electric vehicles. Last year, between the company's 12+ brands the group delivered around 230,000 all-electric vehicles. That might only be around 2% of Volkswagen Group's total vehicle deliveries, but it is already a...

One of Warren Buffet's favorite quotes comes from the father of value investing, Benjamin Graham. It goes like this: in the short run, the market is like a voting machine but in the long run, the market is like a weighing machine. This means that in the short run, the market is tallying up which firms are popular and unpopular but in the long run, the market is assessing the substance of a company. Electric car-battery developer QuantumScape (QS) is a textbook example of the stock market behavior in the short term. One moment it was a market darling, and the next, it was completely out of favor. Lately the selling pressure on QS stock has been intense. So intense that the company has lost a whopping 60% of its value in the past two weeks. No, the company didn't declare bankruptcy and nothing equally devastating happened to it. In fact, nothing news worthy came out about the company, its technology or the market it's in.  As mentioned in a previous article , QS is not all hy...

Many of the big, incumbent automakers are going to be big losers in the next decade. Disruptive and existential threats have been coming for big, incumbent automakers for a while, but they are now playing out faster and in more dramatic fashion than originally predicted. So much so that many of the incumbents will vanish over the next two decades. Those who survive won't be anything close to their current form and will be miles behind Tesla and other new entrants such as NIO. The closest analogy to the fate of the automakers is what happened to mobile phone manufacturers (remember Ericsson, Nokia, Sony etc.). The auto giants have not been sitting idle. Since 2017 - when Tesla's stock started its ascent - many have done massive overhauls of their structure to become more nimble and efficient. They have also been reducing their costs. Despite all these efforts, they find themselves in a more precarious situation than in 2017. What has really changed that they didn't foresee -...

One of the most unsettling developments in business in 2020 was the trend that having no revenues proved not to be a deterrent for electric vehicle (EV) companies to go public. Although, the practice is unheard of in the the automotive world, Nikola, Fisher and others have done it and achieved multi-billion dollar valuations. The latest rebel is QuantumScape (QS) - a battery start-up that became a public company in November after merging with a SPAC. Although, it won't generate revenues until 2026, its market cap exceeded $50B in the last week of December. When the SPAC deal was announced, the parties decided a $3.3B valuation was appropriate. Except for QS showcasing its lab results, nothing material has changed between the SPAC deal and the last week of December to prompt the astronomical rise in valuation. It would appear that the same speculative fever that has many investors chasing the next Tesla has taken hold of QS investors. But is QS all hype, like Nikola, whose own techn...