Electric vehicle (EV) stocks have been one of the biggest stories of 2020. First it was the big names, such as Tesla (NASDAQ:TSLA) and Nio (NYSE:NIO). Then excitement moved into all the special purpose acquisition company (SPAC) offerings focused on the EV space. And now, the enthusiasm has spread to the smaller EV firms. That now includes Electrameccanica (NASDAQ:SOLO). Indeed, SOLO stock has gone on an absolutely wild ride in recent weeks.
Shares went from $1 each up to $5 during the summer and then declined sharply. Some folks suggested that it was a mere pop and drop and that there wasn’t much actually going on operationally at Electrameccanica. However, the bears have seen their fortunes evaporate in recent weeks as SOLO stock suddenly blasted off from $3 to as high as $14 a couple of weeks ago. While SOLO stock has settled back around the $7 mark for now, it’s still proven dangerous for skeptics.
Electrameccanica: Going Its Own Way
There are two defining features that separate Electrameccanica from its EV peers. First, Electrameccanica went public more than two years ago. The company’s management team is passionate about trying to build its vehicles, and is clearly in it for more than just a quick cash grab.
That’s arguably quite a different perspective than the spate of EV companies that have all rushed to go public over the past few months while the boom is on. It’s a sign of integrity that Electrameccanica was developing its product and had shares listed for the public long before the sector got hot.
And the other striking difference is that the lead Electrameccanica vehicle design only has three wheels. Seating only one passenger and having a range of just 100 miles or so, the Solo electric vehicle is quite a different proposition than its rival EV models. The big perk, besides being unique, is that the Solo will be available for less than $20,000. For folks that want to own an electric vehicle for shorter trips or that want an affordable entry into the electric space, the Solo could be just the ticket. Or it might not; only time will tell whether consumers appreciate Electrameccanica’s bold product design.
Short Sellers Take Aim
Some folks aren’t waiting for vehicle sales to get rolling in 2021 before making judgments, however. To that end, Citron Research slammed Electrameccanica in a recent tweet. In it, Citron said that: “$SOLO is the EV trade for the real sucker.” The tweet went on to claim that Electrameccanica had no serious institutional investors and that the company’s then-$1 billion market capitalization was “a joke.” Citron concluded by offering a measly $2 price target for SOLO stock.
This tweet from Citron did come on November 20, when SOLO stock peaked above $10/share. So Citron’s rhetoric was well-timed and seemingly had a negative impact on the share price. However, Electrameccanica was trading for under $3 not that long ago and is still holding up around $7.00 now. So this harsh rhetoric failed to totally crack the stock price. Meanwhile, with 14% of the float shorted as of the most recent data, the stage is potentially set for covering on any sort of good news.
SOLO Stock Verdict
Electrameccanica is one of the various EV stocks that needs to prove itself with results. It’s one thing to have a cool-looking model and a few sales to early adopters. It’s another to build a full-scale commercial business. At this point, Electrameccanica has done the former but isn’t there yet on the second point. Until the revenues and profits really start rolling in, it’s easy for critics such as Citron Research to take easy shots at Electrameccanica. Particularly after the fiasco that has happened with Nikola Motors (NASDAQ:NKLA) and its over-hyped rhetoric, it pays to be a little more cautious with these EV stocks.
That said, back here at a $550 million market cap and a $7 share price, there’s some speculative appeal to SOLO stock. It’s not as frothy as many of the other EV stocks at the moment. And if its unique concept vehicle does indeed find eager buyers, the company could end up being worth several multiples of the current share price. Electrameccanica is risky, as it is attempting to commercialize a fairly unusual sort of vehicle. If you believe in the vision, however, the stock could be a decent play.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.