Highlights

EV Play - Rise of Battery

Author: ChongLeeWoon   |   Latest post: Fri, 13 Aug 2021, 9:00 PM

 

GENETEC vs GREATECH - Who is KING ???

Author:   |    Publish date:


Finally, the battle is here. The match that everyone has been waiting for.

In one corner, we have one contender who has earned the right to take a shot at the champ. In the other corner, the reigning champ awaits the challenger, sizing him up head to toe. 

(Deep voice) Ladies and gentleman... The EV-Battery Assembly Fight of the year...

GENETEC vs GREATECH !!!

WHO DO YOU GOT ???

It is not my motive to impress you with deep knowledge of the EV-battery industry, nor to present a forecast of the numbers of automation lines being sold by the 2 companies. This will be well covered by analysts in their neatly-formatted reports filled with fancy charts and diagrams in the color theme of their corporate logo. 

I am here to entertain you folks on i3. After all, this is i3 so why so serious!? Hehe...

So, instead of telling you why I place my bet on GENETEC, I will share my reasons why i did NOT put money on GREATECH. 

And the reason is simple:

Greatech's main client LORDSTOWN is going bust (insert "poof" sound effect)

Now before any Greatech fanboys accuse me of not doing enough research to know that Greatech is diversifying their client base or they already have new major clients signed up, feel free to educate me and everyone else in the comments section. Thanks in advance.

My limited research tells me that Lordstown is still Greatech's main client at least for FY21.

Lordstown is an EV company that has zero revenue and fake orderbooks. A brief history:

2018Founded by ex-CEO Steve Burns

2019 - Bought over GM's plant in Lordstown, Ohio that GM was about to close down, for US$40m that was borrowed from GM. GM then invested in Lordstown. 

Translation: rather than closing down a plant that was no longer in use, and having to lay off all the workers - politically bad move, GM gave Lordstown a chance to keep things going. 

2020 - In March, Lordstown paid US$12m+ to Workhorse to buy over the designs of electric truck codenamed W-15. Workhouse is also entitled to 1% on gross sales proceeds of the truck as well as a 10% equity stake in Lordstown. 

Note: This is a related-party-transaction as Workhorse was founded by Steve Burns and prior to setting up Lordstown, Steve was the CEO of Workhorse. 

In October 2020, Lordstown got listed via a SPAC merger at a valuation of US$1.6 billion. 

Wow... what a dream for an EV start-up of less than 3 years.
From zero to a US$1.6 billion on Nasdaq!

Yes, the EV dream of Lordstown is just that. A dream. 

2021 - On 12th March, Hindenburg Research dropped a bombshell that sent Lordstown on a downhill descend ever since. 

For the full scoop: https://hindenburgresearch.com/lordstown/

The main point is Lordstown's orders were not genuine.

The 100k units pre-orders that Lordstown was boasting all before?

They were merely LOIs, letter-of-intent from unsuspecting "clients" that did not even know the existence of such documents! 

In March, the then-CEO Steve Burns vehemently denied the report, saying "haters gonna hate", quoting Taylor Swift's ubiquitous song "Shake It Off". 

Then shareholders started filing lawsuits on the company claiming fraud. Till this day, Lordstown have at least 11 class-action lawsuits filed against the company and ex-CEO Steve.

In May's earnings call, then-CEO Steve acknowledged that "there were some challenges" as the the company "needs more capital" to make it to production. 

In less than a month, both CEO and CFO resigned. Shares tanked 20%.

 

And retail investors in Bursa are busy defending Lordstown, saying

"oh Greatech's client just short-term cash-flow issue, can settle wan"

"Lu boh steady lor, CEO resign only ma. Once announce new leadership new capital injection sui sui turnaround hoseh liao"

Wow, did we not learn from the recent mega-saga involving shoplot auditors being sued? 

True enough, Lordstown did announce an "investment" from a hedge fund: Yorkville Advisors Global (YA).

Headlines like these could be very misleading. Let's look at how this US$400m is raised. 

Source: 
https://www.bloomberg.com/news/newsletters/2021-07-27/matt-levine-s-money-stuff-lordstown-is-selling-some-stock-krm8v9bq?sref=uabJFh35 

(limited research also make sure sources are cun cun one like Bloomberg ok, don't play play)

To summarize:
 
Day 1
Lordstown calls Yorkville Advisors (YA): "Bro, I need $1m"
 
Day 1-3
YA sells Lordstown shares in open market amounting to $1.03m (short)
 
Day 4
YA hands $1m to Lordstown
Lordstown issue shares to YA amounting to $1.03m (cover short)
 
The $30k extra that YA receives is their fees of 3%
(Plus: Lordstown gives YA upfront 371k shares worth ~$2.7m to start)
 
!!! This is NOT raising capital from hedge fund
!!! This is raising capital from RETAILER or OPEN MARKET
 
What a sight. 
 
6 months after listed on Nasdaq, fraud was uncovered!
 
1 month later, CEO and CFO resigned.
 
1 month later, Lordstown has to resort to  selling shares in the open market to stay afloat!
 
How much longer can Lordstown continue to operate? 
 
Coming back to our local market, I remember a Greatech fanboy calling me up to say
 
"I told you Lordstown steady wan la. Got hedge fund support"
"Now got hedge fund inject capital liao. You think hedge fund so stupid to invest meh?"
 
Well, the hedge fund not stupid. The ones who buy Lordstown shares maybe not so smart only.
 
SUMMARY
I somehow feel the assembly lines sold to Lordstown are more for show than for real production. The company has relied on many factory tours to convince investors to invest in them. Remember, it was isted in October 2020 with just an EV truck concept and a so-called 100k orderbook which was exposed in March 2021 to be fake
 
Hence, still need to order some machines here and there "for demo purpose only" haha (sorry for laughing on serious subject)
 
Again, how many cars produced since 2018 till now? ZERO. KOSONG. 零.
 
As of today, GREATECH's market cap (RM8.5b / US$2b) is 2x DOUBLE of Lordstown's (US$1b).
 
As a shareholder, would you be proud that your market cap is DOUBLE of your main client? 
 
As a growing company, you want your client to be the industry-leader. You get to work with the best, learn from the best, and GROW with the best
 
If you want to invest in the growth of the EV-Battery segment, why not put your money into a company whose client is the world's number 1 EV pioneer?
 
So, there you have it. My reason for putting money on GENETEC instead of GREATECH.
 
 
 
 
 
Note: I have taken the time to write the above, to highlight the severity of Lordstown's governance issues and going-concern risks. These issues should not be taken lightly because too many have fallen victims to such cases. It is not my intention for the troubles of Lordstown to negatively affect Greatech in any manner. As a proud countryman, I hope Malaysian companies can grow and be industry leaders on the world-stage. That way, we get to invest in quality businesses and be rewarded along the growth journey. Have a pleasant weekend everyone :)
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Labels: GENETEC, GREATEC

Related Stocks

Chart Stock Name Last Change Volume 
GENETEC 46.70 0.00 (0.00%)
GREATEC 7.30 0.00 (0.00%)

  Be the first to like this.
 
pang72 Thank you Sir..

Genetec - the king of EV!!
06/08/2021 11:35 PM
Powerplay666 Chong Lee Woon, what is your fair value for Genetec?
07/08/2021 11:56 AM
Cakes Moon Wow, great writing!
07/08/2021 12:03 PM


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