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Nikola Corporation (NKLA) – The SPAC is back (plus a magic money machine)

Nikola Corporation (NKLA) – The SPAC is back (plus a magic money machine)

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3 years ago

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Nikola Corporation (NKLA) – The SPAC is back (plus a magic money machine) by Value And Oppurtunity

Intro

Nikola Corporation (NASDAQ:NKLA) is a company I haven’t heard of until a week ago or so. It is a pre-revenue, prototype-product company that according to their web site develops Hydrogen fueled and electric trucks.

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Q1 2020 hedge fund letters, conferences and more

The VC Past

Nikola Corporation did a Series D funding round in September last year at a pre-money valuation of 3 bn USD which is quite remarkable for such an early stage company and they seem to have received ~500 mn USD from corporate partners CNH, Bosch and Hanwa. Although the valuation would raise some eyebrows, this would be still not considered super crazy by VC standards if they have a great team and great technology assets.

The company is obviously trying to piggyback on Tesla’s recent success, which the name of the company cleary does not hide (Nikola Tesla now has a a company each for his first name and his family name…) . Funnily enough, the first name sued the family name for a 2 bn USD patent infringement.

However some things were strange even at that stage:

Overall, I would personally doubt the 3 bn USD valuations. Unicorn companies often lie big time about their achieved valuations and few participants have an incentive to tell the truth.

Anyway, the series D round seems to have been only a semi success and not enough to actually secure start of production.

Enter the magic SPAC

I guess some of my readers know what a SPAC (Special Purpose Acquisition Company) is: It is a company that goes public and raises cash, with the intent of buying (or merging with) another promising company at some point in the future. At the end of the day it is a “backdoor IPO” mechanism that allows the future partner  to avoid all the hassle with actually doing an outright IPO.

One of these SPACs or blank Cheque companies was a company called VectoIQ that went public in May 2018 with the target of finding a suitable operating company within the next 2 years. The company issued 23 mn shares at 10 USD per share, netting the company around 225 mn USD after fees.

The way these SPACs work is that he “founders” received another 5.75 mn shares basically for free before the IPO. So those people who bought the stock at 10 USD actually got diluted by ~1/3 already on the first day. As a “sweetener”, IPO investor received additional warrants to have a better upside potential in case something would happen and if now deal would have been done until may 18th 2020, the IPO investors would get their money back and the founder’s shares would be worthless.

For a long time, Vector IQ traded at around 10 USD, before in the beginning of March, VectoIQ announced that (fanfare) Nikola Motor would be the target. After a quick “Pop” , even one month after the announcement, VectoIQ traded at 10 USD per share, before finally the stock started to climb to around 34 USD pre merger.

Now the real magic begins:

The combined company after re-listing has 360.9 mn Shares outstanding, which at the pre-merger price of 34 USD would have meant a market cap of ~12.3 bn USD.  But this is not the end of the story: In the first few days of trading, the stock “exploded” to 86 USD or a 31 bn USD market cap. AT the time of writing the stock price was still 70 USD or 25 bn USD market cap (plus Warrant).

As a small side story, as part of the merger, some “family and friends” were able to invest 500 mn USD at a valuation of 10 USD per share.

Another funny side story was that Nikola Corporation applied for a small business Corona-emergency loan in April and actually received 4 mn USD.

SPACs like VectoIQ are often used to quickly cash in on a trend with often inferior business models. The circumvention of the IPO allows the company to trade without big scrutiny from professional investors. Considering how soft IPO analysts usually are, going via a SPAC normally itself is a sign of weakness.

SPAC usage is often highest towards the peak of bull markets and the overall performance for SPACs is shitty:

They construct a sample of 158 SPACs for the period 2003-2008 and report positive performance in the range of 2% to 3% for SPACs in the short term. However, for long term performance, the average half year return is equals to -14%, average one year return is -33% and average three years return is -54%. They state that board independence and the structure of ownership do not affect returns.

The magic Nikola money machine: Selling the same truck twice

As Nikola Corporation not only wants to become the “Tesla of Hydrogen Trucks” but also in parallel wants to create the Hydrogen infrastructure, they probably need a lot more money than the roughly 1 bn or so they have now in the bank.

Here is an interesting interview with the founder on finances:

The first note is that Nikola was always claiming they had 14 bn of “pre orders” for their trucks, but actually it seems to be only a 800 mn USD order from Anheuser Bush so far.

However the most astonishing feature of this interview is the part where he explains the financing of the hydrogen network which is the “Most valuable asset” of the company (because we are a “Energy tech” company”):

“We sell the trucks to the customers, i.e. sell them the leases. Then we sell the leases off and use the money for building the Hydrogen Network”.

I listened to that passage at the end several times because I thought that I don’t understand it due to not being a native speaker, but after hearing it five times I am convinced that this statement is utter bullshit.

What Milton is basically saying is that someone supposedly is paying a second time for the very same truck that enables him both, to actually build the truck and additionally finance the hydrogen network. You will also not be able to “sell the lease” to the trucking company as a lease does mean that there will be no or only a very small upfront payments.

But it seems that such details do not bother a true genius.

Some differences to Tesla:

From what I understood, the main difference to Tesla is that part of the trucks will not be build by Nikola Corporation but by CNH in its existing factory in Ulm/Germany. The basis will be an existing Iveco truck plus an infotainment system and a Nikola Power train which itself seems to have been developed by Bosch.

They also seem to offer “freight as a service”, I.e. guaranteeing the customers a certain amount of driven miles including all costs. I guess this is the “Lease” he wants to selloff to someone else but the truck company will for sure not pay upfront and somehow he needs to finance the truck.

The biggest issue in my opinion is the fact, that all customers of Nikola will be businesses  who run on very thin margins. So other than Tesla, Nikola will not be able to charge for any coolness factor, but the trucks need to be cheaper all in than the existing mass produced trucks by all competitors.

Summary:

All in all, Nikola Corporation looks like a cheap (and pretty bad) copy of Tesla, trying to ride the current Fuel cell /hydrogen /zero emission boom. For people who have a longer memory, they might remember a fuel cell boom 20 years ago with names like Ballard Power (which by the way has gained 300-400% in the recent months).

What I have seen so far from the CEO looks pretty bad with quite incoherent communication. I haven’t checked the technology behind Nikola Corporation but to me it looks like a big marketing story that used the “SPAC” structure toi create a quick “pump and dump” scheme to fleece retail investors that want to somehow participate in the next Tesla.

There is certainly a small chance that they are able to inflate this for some time and raise enough money to have a chance to do something, but I am still surprised how quickly after the Covid-19 crash we see such crazy schemes coming up again.

I also guess that this will not be the last Hydrogen “pump and dump”. Maybe I should try to find one among the many small shitty stocks in Germany and ride the wave too.

The post Nikola Corporation (NKLA) – The SPAC is back (plus a magic money machine) appeared first on ValueWalk.

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What Follows US Hegemony

What Follows US Hegemony

Authored by Vijay Prashad via thetricontiental.org,

On 24 February 2023, the Chinese Foreign Ministry released a…

Published

6 hours ago

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March 20, 2023

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What Follows US Hegemony

Authored by Vijay Prashad via thetricontiental.org,

On 24 February 2023, the Chinese Foreign Ministry released a twelve-point plan entitled ‘China’s Position on the Political Settlement of the Ukraine Crisis’.

This ‘peace plan’, as it has been called, is anchored in the concept of sovereignty, building upon the well-established principles of the United Nations Charter (1945) and the Ten Principles from the Bandung Conference of African and Asian states held in 1955. The plan was released two days after China’s senior diplomat Wang Yi visited Moscow, where he met with Russia’s President Vladimir Putin.

Russia’s interest in the plan was confirmed by Kremlin spokesperson Dmitry Peskov shortly after the visit: ‘Any attempt to produce a plan that would put the [Ukraine] conflict on a peace track deserves attention. We are considering the plan of our Chinese friends with great attention’.

Ukraine’s President Volodymyr Zelensky welcomed the plan hours after it was made public, saying that he would like to meet China’s President Xi Jinping as soon as possible to discuss a potential peace process. France’s President Emmanuel Macron echoed this sentiment, saying that he would visit Beijing in early April. There are many interesting aspects of this plan, notably a call to end all hostilities near nuclear power plants and a pledge by China to help fund the reconstruction of Ukraine. But perhaps the most interesting feature is that a peace plan did not come from any country in the West, but from Beijing.

When I read ‘China’s Position on the Political Settlement of the Ukraine Crisis’, I was reminded of ‘On the Pulse of Morning’, a poem published by Maya Angelou in 1993, the rubble of the Soviet Union before us, the terrible bombardment of Iraq by the United States still producing aftershocks, the tremors felt in Afghanistan and Bosnia. The title of this newsletter, ‘Birth Again the Dream of Global Peace and Mutual Respect’, sits at the heart of the poem. Angelou wrote alongside the rocks and the trees, those who outlive humans and watch us destroy the world. Two sections of the poem bear repeating:

Each of you, a bordered country,
Delicate and strangely made proud,
Yet thrusting perpetually under siege.
Your armed struggles for profit
Have left collars of waste upon
My shore, currents of debris upon my breast.
Yet today I call you to my riverside,
If you will study war no more. Come,
Clad in peace, and I will sing the songs
The Creator gave to me when I and the
Tree and the rock were one.
Before cynicism was a bloody sear across your
Brow and when you yet knew you still
Knew nothing.
The River sang and sings on.

…

History, despite its wrenching pain
Cannot be unlived, but if faced
With courage, need not be lived again.

History cannot be forgotten, but it need not be repeated. That is the message of Angelou’s poem and the message of the study we released last week, Eight Contradictions of the Imperialist ‘Rules-Based Order’.

In October 2022, Cuba’s Centre for International Policy Research (CIPI) held its 7th Conference on Strategic Studies, which studied the shifts taking place in international relations, with an emphasis on the declining power of the Western states and the emergence of a new confidence in the developing world. There is no doubt that the United States and its allies continue to exercise immense power over the world through military force and control over financial systems. But with the economic rise of several developing countries, with China at their head, a qualitative change can be felt on the world stage. An example of this trend is the ongoing dispute amongst the G20 countries, many of which have refused to line up against Moscow despite pressure by the United States and its European allies to firmly condemn Russia for the war in Ukraine. This change in the geopolitical atmosphere requires precise analysis based on the facts.

To that end, our latest dossier, Sovereignty, Dignity, and Regionalism in the New International Order (March 2023), produced in collaboration with CIPI, brings together some of the thinking about the emergence of a new global dispensation that will follow the period of US hegemony.

The text opens with a foreword by CIPI’s director, José R. Cabañas Rodríguez, who makes the point that the world is already at war, namely a war imposed on much of the world (including Cuba) by the United States and its allies through blockades and economic policies such as sanctions that strangle the possibilities for development. As Greece’s former Finance Minister Yanis Varoufakis said, coups these days ‘do not need tanks. They achieve the same result with banks’.

The US is attempting to maintain its position of ‘single master’ through an aggressive military and diplomatic push both in Ukraine and Taiwan, unconcerned about the great destabilisation this has inflicted upon the world. This approach was reflected in US Defence Secretary Lloyd Austin’s admission that ‘We want to see Russia weakened’ and in US House Foreign Affairs Committee Chairman Michael McCaul’s statement that ‘Ukraine today – it’s going to be Taiwan tomorrow’. It is a concern about this destabilisation and the declining fortunes of the West that has led most of the countries in the world to refuse to join efforts to isolate Russia.

As some of the larger developing countries, such as China, Brazil, India, Mexico, Indonesia, and South Africa, pivot away from reliance upon the United States and its Western allies, they have begun to discuss a new architecture for a new world order. What is quite clear is that most of these countries – despite great differences in the political traditions of their respective governments – now recognise that the United States ‘rules-based international order’ is no longer able to exercise the authority it once had. The actual movement of history shows that the world order is moving from one anchored by US hegemony to one that is far more regional in character. US policymakers, as part of their fearmongering, suggest that China wants to take over the world, along the grain of the ‘Thucydides Trap’ argument that when a new aspirant to hegemony appears on the scene, it tends to result in war between the emerging power and existing great power. However, this argument is not based on facts.

Rather than seek to generate additional poles of power – in the mould of the United States – and build a ‘multipolar’ world, developing countries are calling for a world order rooted in the UN Charter as well as strong regional trade and development systems. ‘This new internationalism can only be created – and a period of global Balkanisation avoided’, we write in our latest dossier, ‘by building upon a foundation of mutual respect and strength of regional trade systems, security organisations, and political formations’. Indicators of this new attitude are present in the discussions taking place in the Global South about the war in Ukraine and are reflected in the Chinese plan for peace.

Our dossier analyses at some length this moment of fragility for US power and its ‘rules-based international order’. We trace the revival of multilateralism and regionalism, which are key concepts of the emerging world order. The growth of regionalism is reflected in the creation of a host of vital regional bodies, from the Community of Latin American and Caribbean States (CELAC) to the Shanghai Cooperation Organisation (SCO), alongside increasing regional trade (with the BRICS bloc being a kind of ‘regionalism plus’ for our period). Meanwhile, the emphasis on returning to international institutions for global decision-making, as evidenced by the formation of the Group of Friends in Defence of the UN Charter, for example, illustrates the reinvigorated desire for multilateralism.

The United States remains a powerful country, but it has not come to terms with the immense changes taking place in the world order. It must temper its belief in its ‘manifest destiny’ and recognise that it is nothing more than another country amongst the 193 members states of the United Nations. The great powers – including the United States – will either find ways to accommodate and cooperate for the common good, or they will all collapse together.

At the start of the pandemic, the head of the World Health Organisation, Dr Tedros Adhanom Ghebreyesus, urged the countries of the world to be more collaborative and less confrontational, saying that ‘this is the time for solidarity, not stigma’ and repeating, in the years since, that nations must ‘work together across ideological divides to find common solutions to common problems’.

These wise words must be heeded.

Tyler Durden Sun, 03/19/2023 - 23:30

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International

Royal Caribbean Officially Makes Controversial Change

The cruise line has made a controversial change that some passengers will love while others will be angry.

Published

19 hours ago

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March 19, 2023

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The cruise line has made a controversial change that some passengers will love while others will be angry.

During the early days of the cruise industry's comeback from the covid pandemic, Royal Caribbean outlawed smoking in the casino. At the time, the Centers for Disease Control (CDC) required passengers to wear masks in public areas of the ship except when eating or drinking while stationary.

Smoking was, at first, a sort of loophole. People would smoke in the casino and remove their masks (or at least move them to the side) while playing slot machines. That basically meant that unlike drinking, where your mask could be moved and then replaced for a sip, smokers were essentially not wearing a mask.

DON'T MISS: Carnival Cruise Line Comments on a Possible (Very) Adult Change

Royal Caribbean (RCL) - Get Free Report closed that loop by fully outlawing smoking in its casinos while masks were still required. That was something that smokers weren't happy about, but probably understood given how large a role the CDC was playing in setting cruise ship rules.

Once the CDC stopped requiring masks (and regulating cruise ships at all), Royal Caribbean reverted to its pre-pandemic smoking policies. That meant that every casino on its ships had a smoking section. Technically, smoking is only allowed when actually playing a slot machine, but that's hard to enforce and the casinos quickly filled back up with smoke.

Now, the cruise line has officially made a long-rumored move that should make non-smokers really happy while angering a whole different group of the cruise line's passengers.

Image source: Matt Cardy/Getty Images

Oasis-Class Ships Getting Non-Smoking Area

Wonder of the Seas, the newest member of Royal Caribbean's Oasis class was originally built to sail out of China. It was moved to Florida due to the covid pandemic which created a sort of happy accident for non-smokers.

The ship was built with a secondary casino that was originally intended as a high rollers room. Once the ship was repurposed to sail from the United States, that smaller casino was shifted from an area designed to cater to big-money players into a non-smoking casino.

For months, it has been rumored that the cruise line would turn the "Jazz on 4" space -- the same location as the non-smoking "Golden Roon" on Wonder of the Seas -- into similar non-smoking casinos. Royal Caribbean never commented on those rumors, but it did warn passengers on some sailings that service in the Diamond Lounge, an area next to Jazz on 4 reserved for Diamond and higher members of the company's loyalty program, would be disrupted due to construction.

The results of that construction have been revealed on another Oasis-class ship, Harmony of the Seas. Johnny Travalor shared pictures of the new casino in a Facebook group for fans of Royal Caribbean's casinos.

"The brand new non-smoking casino on Harmony officially opened today and I have been here since the opening playing, donating!" he shared.

That's not official confirmation that all Oasis-class ships will have Jazz on 4 turned into a non-smoking casino, but all signs point in that direction.

Royal Caribbean Makes Some Passengers Mad

No change on a cruise ship will make all passengers happy. Some Royal Caribbean gamblers have suggested that the non-smoking area, which is much smaller than the original casino, should be the smoking area.

"Maybe once they see the non-smokers are bursting at the seam in that space and the smoking casino isn’t as crowded they will reverse it," Barb Boyer Green shared.

"That should be the smoking room...seems like the non-smokers are being put in a closet," Maureen Ethier added.

Not all passengers, however, are upset because of the size of the non-smoking area. Some are lamenting the loss of Jazz on 4, which hosted live jazz music.

"I think this is an overall loss, with now an entertainment area being taken over on this ship. I always enjoyed the jazz club and this will do nothing for the smell of the ship, net loss for all passengers" Justin Rogers wrote.

"It was our fav such a sad day. It was our escape, great talent, romantic, not another venue like it. Such a shame," added Julia Doumad.

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The limits of expert judgment: Lessons from social science forecasting during the pandemic

A sobering picture emerges from a study testing social scientists’ ability to predict societal change during the COVID-19 pandemic.

Published

22 hours ago

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March 19, 2023

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To find out how well social scientists can predict societal change, researchers ran the largest forecasting initiative in the field’s history. Here’s what they found. (Shutterstock)

Imagine being a policymaker at the beginning of the COVID-19 pandemic. You have to decide which actions to recommend, how much risk to tolerate and what sacrifices to ask your citizens to bear.

Who would you turn to for an accurate prediction about how people would react? Many would recommend going to the experts — social scientists. But we are here to tell you this would be bad advice.

As psychological scientists with decades of combined experience studying decision-making, wisdom, expert judgment and societal change, we hoped social scientists’ predictions would be accurate and useful. But we also had our doubts.

Our discipline has been undergoing a crisis due to failed study replications and questionable research practices. If basic findings can’t be reproduced in controlled experiments, how confident can we be that our theories can explain complex real-world outcomes?

Predicting social change

To find out how well social scientists could predict societal change, we ran the largest forecasting initiative in our field’s history using predictions about change in the first year of the COVID-19 pandemic as a test case.

To do this, we tested how well social scientists could predict societal change in two ways. First, we asked social scientists for quick guesses about how things would change over the next two years of the pandemic.

Second, we ran a competition where over 100 teams of social scientists with access to historical data made month-by-month forecasts. We formally assessed their predictions for a range of social sciences phenomena, including changes in prejudice, subjective well-being, violence, individualism and political polarization between May 2020 and May 2021.

Forecasting errors when social scientists were predicting social and psychological consequences of COVID-19.
Results of the social science forecasting tournaments by the Forecasting Collaborative conducted during the 2020-2021 years of the COVID-19 pandemic. (Igor Grossmann)

Our findings, detailed in peer-reviewed papers in Nature Human Behaviour and in American Psychologist, paint a sobering picture. Despite the causal nature of most theories in the social sciences, and the fields’ emphasis on prediction in controlled settings, social scientists’ forecasts were generally not very good.

In both papers, we found that experts’ predictions were generally no more accurate than those made by samples of the general public. Further, their predictions were often worse than predictions generated by simple statistical models.

Improving predictions

Our studies did still give us reasons to be optimistic. First, forecasts were more accurate when teams had specific expertise in the domain they were making predictions in. If someone was an expert in depression, for example, they were better at predicting societal trends in depression.

Second, when teams were made up of scientists from different fields working together, they tended to do better at forecasting. Finally, teams that used simpler models to generate their predictions and made use of past data generally outperformed those that didn’t.

These findings suggest that, despite the poor performance of the social scientists in our studies, there are steps scientists can take to improve their accuracy at this type of forecasting.

An infographic of the map of the world with blue dots indicating where participants in the World after COVID were from
Results of the World after COVID project documenting the diversity and uncertainty in predictions of the social and psychological consequences of the pandemic among members of the world’s scientific community. (Igor Grossmann)

Our research also found that, compared to lay people, social scientists were more aware of the herculean nature of the task at hand. In our studies, they expressed uncertainty and less confidence than lay people when making forecasts.

Similarly, social scientists expressed uncertainty in their open-ended predictions for the World after COVID project, a video series we conducted with eminent scholars in the first year of the pandemic.

Thus, social scientists still have some wisdom to offer, reminding us of the uncertainty and the need for humility when forecasting the future.

A call to action

Our work highlights the importance of developing reliable sources of data and suggests strategies that can improve the accuracy of such forecasts.

These results are a call to action for the scientific community to continue developing better methods for predicting societal change so the public can rely on scientists in times of crisis.

Our projects show that expert prediction of societal change during the COVID-19 pandemic was far from perfect. But they also suggest ways such predictions can be improved. By drawing on specific expertise, collaborating across disciplines and making data-driven models, social scientists can produce more accurate and useful forecasts for policymakers and the public.

The scientific community should strive to develop better methods for predicting societal change, while acknowledging the uncertainty and complexity involved. Policymakers should appreciate the value of expert insight, but also be aware of its limitations and potential biases. If we want to predict the future, or shape it for that matter, than a bit of humility would likely help.

Igor Grossmann receives funding from the Social Sciences and Humanities Research Council of Canada, Ontario Ministry of Research, Innovation and Science, The John Templeton Foundation, and the Templeton World Charity Foundation.

Cendri Hutcherson receives funding from the Social Sciences and Humanities Research Council of Canada, the Natural Sciences and Engineering Research Council of Canada, the Canada Foundation for Innovation, the Ontario Ministry of Research and Innovation, and the National Institutes for Mental Health (USA).

Michael Varnum has received funding from the National Science Foundation (USA), the US Fulbright Program, and the China Postdoctoral Science Foundation.

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