This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.

Reality Check

Finimize

Contributor:
Finimize
Visit: Finimize

What’s going on?

Bank of America reckons there’s about to be a surge of initial public offerings (IPOs) in the electric vehicle space, but overzealous investors might want to tread carefully…

What does this mean?

Electric vehicles (EVs) are only getting more popular as time goes by, and companies in the sector – car, battery, and charging station makers alike – have been trying to raise cash to meet that rising demand. So they’ve increasingly been listing on global stock markets via initial public offerings (IPOs), and investors have been keen to get in on the action. Just look at Rivian: the electric truckmaker raised nearly $12 billion in the biggest IPO of the year earlier this month, and its shares are already 47% above their initial listing price. And since other EV companies are set to follow in its auspicious tire tracks, Bank of America’s made a bold prediction: it reckons the industry could raise a total of $100 billion from IPOs by 2023.

Why should I care?

For markets: This is getting silly.

Investors have pushed EV valuations to all-time highs, with industry leader Tesla alone having seen its stock price climb nearly 1,600% in the last two years. But Research Affiliates has warned that this might be a sign of so-called “market delusion”, where valuations in a hot industry all rise in sync even though the rival companies can’t possibly all be winners. And when that fever breaks, you’d better hope you’re holding the right stock…

The bigger picture: The US revs its engine.

Someone needs to power all those EVs, which is why battery-makers are taking steps to keep up too: the top 10 in the world are expected to nearly triple their combined manufacturing capacity by 2022, according to Bloomberg. All of those are headquartered in Asia, with China alone making 80% of the world’s batteries. But the US is trying to change that: it passed a bill last week that’ll provide $6 billion in grants to battery-makers and their materials producers.

Originally Posted on November 25, 2021 – Reality Check

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Finimize and is being posted with permission from Finimize. The views expressed in this material are solely those of the author and/or Finimize and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.

Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

trading top