Since I last wrote about Ideanomics (NASDAQ:IDEX) stock in mid-February, a few things have changed. I’ll start by noting that I am not a fan of the company. I feel it is too disjointed, lacking in focus.
I’ll begin by touching on what has changed at Ideanomics. Then I’ll jump into why these updates do, or do not change my previously negative outlook on Ideanomics and IDEX stock.
Increasing Influence
In late February, Ideanomics announced that it had joined Calstart, a national non-profit working to accelerate clean transportation. The primary benefit for Ideanomics is that the company gains access to a network of clean-tech manufacturers, suppliers, and institutions. Ideanomics will be a full member of Calstart, which ostensibly means the company has increased leverage throughout the EV landscape moving forward.
As the company notes in the press release relaying the news, “The Calstart membership will assist in growing its wholly-owned subsidiaries, Wireless Advanced Vehicle Electrification (WAVE) and Medici Motor Works, Ideanomics North American heavy truck and specialty vehicle division, as well as portfolio company Solectrac.”
Nothing New
IDEX stock moved upward slightly in the days following the news. However, it would be a stretch to attribute much correlation to the modest price movement and the news.
Overall, the news is inarguably positive. Yet, until it bears fruit in the form of deals, an increased book of business, or revenue there’s little that’s fundamentally changed.
Increasing Its EV Bike Presence
Ideanomics is divided into two business divisions: Ideanomics Mobility and Ideanomics Capital. Within the Mobility division, Ideanomics has already established a position in e-bikes. The company has a controlling stake in Tree Manufacturing. Tree Manufacturing produces Treelectrik EV mopeds, claiming to be the first company to bring a true electric bike to Malaysia.
On March 9, Ideanomics announced that it has increased its portfolio of e-bike related holdings. The company acquired a 20% stake in Energica Motor Company for $13.2 million. Energica produces sport motorcycles, primarily.
Energica has a firm presence in Europe, which is noted as an important EV adopter. At the same time, the company is expanding its sales network within the U.S. Energica has established a commercial relationship with Energica of New England. Energica’s bikes will be able to utilize fast-charging stations already existing in the area. The deal brings Energica’s global dealer network total to 76.
Opportunity
My feeling about the deal is this: Energica doesn’t make Ideanomics’ e-bike presence more attractive. First, Ideanomics’ Treelectrik stake is a controlling one, whereas its Energica stake is only 20%.
More importantly, the opportunity for scooters in southeast Asia looks much more attractive than sport bikes in Europe. A look at Energica’s dealer presence(1) shows that it is Euro-centric. Simply put, scooters are a central part of life and the economic engines of southeast Asia. This is not to say that e-scooters will definitely take root, but the opportunity looks vastly bigger.
Looking Forward
IDEX price charts indicate that the stock is likely to remain volatile. Any investment is going to be a rocky ride filled with lots of bumps along the road. My opinion is that Ideanomics’ clear opportunity is in vehicle financing, specifically within China.
When I last wrote about Ideanomics, I noted its outsized contribution to the overall business.
The Mobile Energy Global division accounted for $10.1 million of the $10.6 million of revenues in Q3. Almost all of the revenue was derived by acting as principal and agent in the sale of vehicles. This looks like the direction that the company will pursue unless it can find ways to make its other businesses viable.
That’s not to say e-bikes have no purpose in the company. Perhaps they will contribute significantly at some point in the future. But I believe Ideanomics is the same fundamentally disjointed company I saw the last time I wrote about it.
Takeaway
Ideanomics remains a no-go in my book. I’ve been clear that I see China as its main opportunity. The company keeps diversifying its portfolio. In this case, I don’t view that diversification as accretive. Therefore, I don’t see IDEX stock rising soon.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
