Invariably, 2020 will be forever known as the year of the novel coronavirus. But in strictly business terms, this is also the year of the pivot. Pharmaceutical and biotechnology firms shifted from their core specialties in the search of a vaccine. But non-healthcare related companies, such as SPI Energy (NASDAQ:SPI), also got into the pivoting game. Before the pandemic, this was a solar energy company. Now, SPI Energy stock is levered toward electric vehicles.
At first, this doesn’t sound terrible at all. As you know, much of the EV demand revolves around the positive impact of alternative energy sources. First, fossil fuels expose us to geopolitical pressures, such as the oil price war between Saudi Arabia and Russia.
Further, combustion-engine cars rely on global supply chains that got severely disrupted during the pandemic. Second, EVs are zero-emission vehicles, which has become a significant talking point recently.
As it relates to the bullish narrative of SPI Energy stock, EVs make tremendous business sense, if you can pull it off. Obviously, companies like Tesla (NASDAQ:TSLA) have demonstrated that people are more than willing to pay for this new technology. Further, with millennials being much more interested in social responsibility and sustainability, EVs offer upside potential.
If that wasn’t enough reason to pivot, consider data from the International Energy Agency. Although international EV sales saw a 40% year-over-year increase in 2019, nominally, sector revenue amounted to less than 3% of total automobile sales. As many analysts have suggested, EV manufacturers have a big addressable market.
On paper, this bodes very well for SPI Energy stock. Further, the solar energy business has natural synergies with EVs. Indeed, if SPI is successful, it could launch a culture of off-grid mobility.
There’s just one little problem, which we’ll get into below.
We Have Seen This Before With SPI Energy Stock
When SPI announced its pivot to EVs last month, it made huge ripples on Wall Street. In fact, Business Insider reported that SPI Energy stock soared as high as 4,345%. That is a crazy swing, even compared to wild markets like cryptocurrencies.
Like anything that has rocketed to that extreme, SPI Energy stock has given up much of those gains. However, shares are still incredibly elevated from the price point before the pivot. Given that so many should be leery of such swings in any circumstance, it gives confidence to speculators that there could be something more to this story.
Indeed, they are correct. We’ve seen this exact story play out almost one year ago to the day of the pivot. Back in September 2019, BNN Bloomberg reported that SPI, “a little-known Chinese solar company,” was breaking into a new market: “U.S. hemp farming.”
At this point, you and I should have the same thought: what the heck are they smoking?
Sure enough, SPI’s cannabis announcement was also met with a surge in SPI Energy stock, though nowhere near as dramatic as the EV disclosure. Still, I’m very skeptical about a solar company that pivoted to hemp that has now pivoted to electric freaking vehicles.
Oh, but it gets better! Through its UMining business unit, SPI “provides a turnkey one-stop cryptocurrency mining hosting and equipment solution.”
Let that sink in for a moment. By its own admission, this is a solar energy company that mines cryptocurrencies, provides mining equipment, cultivates cannabis and through its new EdisonFuture subsidiary, will design and develop EVs.
This is the kind of stuff that attracts audits. At the very least, you’d expect short-sellers to rip into this perplexing organization.
I’m Being Trolled, Right?
Fictional mafioso Tony Soprano once said (and I’m paraphrasing for obvious reasons), don’t crap where you eat and especially, don’t crap where I eat. Throughout my research into SPI Energy stock, Soprano’s words rang loudly.
Call me crazy but I don’t think the guy that makes your car should be the same guy that rolls your joint. And I’m sorry but just because that same guy is also managing your solar energy projects and mining your cryptocurrencies doesn’t add to my confidence.
Honestly, with SPI Energy stock, I feel like I’m being trolled. Apparently, though, at time of writing, SPI commands a market capitalization of nearly $132 million. That’s not nothing, which means many folks see value in this organization.
Here’s the deal. If SPI were developing specific components to these disparate industries, I wouldn’t be so alarmed. But again, the company is designing and developing EVs. With cannabis, it’s aiming to “test, cultivate, process and sell hemp.” Further, SPI will extract cannabidiol or CBD, the non-psychoactive component of the cannabis plant that is purported to “treat insomnia, anxiety and other ailments.”
Don’t get me wrong – I’m not trying to be mean. Genuinely, I’m perplexed. If you’re thinking about SPI Energy stock, may I suggest that you consider some of the opinions of my InvestorPlace colleagues?
If they see something in this, maybe they’re right. But if there’s a consensus of confusion, you might want to avoid this with a 20-foot pole.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.