You may have read stories about an American company that will list on NASDAQ called Nikola. Unsurprisingly it is a self proclaimed competitor for Tesla.
Now readers will know that I think Tesla’s stock market valuation is bizarre relative to its business model but it has now reached the point of actually making stuff and in some cases pretty successfully – just not at a profit. I think I must own some Tesla shares through one or more of the innovations or discovery funds I like, but I would not personally buy them.
Unlike Tesla, Nikola has not yet made a single vehicle. I note that in 2016, within a year of being founded, it was reported to have taken billions of dollars of pre-orders for trucks it has ‘thought up’ (my phrase). This week’s news stories reference billions of dollars of pre-orders again (the same ones?). But it has told the American listing authority (where you have to be honest, or you go to jail) that it plans to make 600 trucks next year. 600 – in a year!
I believe Ford and GM make that many trucks each every day, and maybe more.
Yet the notional stock market valuation of the new company is claimed by its CEO to be approaching that of General Motors. Nikola is a company who say their revenue will be about 3 billion dollars in 2024 (revenue, not profit) which compares with an actual, not projected, 2019 revenue at GM of about 138 billion and an 8 billion profit.
None so blind as they who will not see, as the saying goes. They have raised half a billion dollars to keep trying to make a business. As has been said many times, it is easier to borrow a billion than a million.
There will be a price to pay when these fantasies vanish like morning mist. The direct losses may not impact you or me, but there will be an indirect impact as supposed value vanishes from the global capital markets.
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