Electric cars are the future, but it’s not clear if Ayro (NASDAQ:AYRO) has much of a future itself. AYRO stock is new to the public markets and with its market capitalization of $96 million, it’s still relatively unknown.
That’s surprising considering the fanfare we’ve seen for Nikola (NASDAQ:NKLA). The stock came public via a special purpose acquisition company (SPAC), before seeing its stock price zoom up over $90. At that time, Nikola was garnering a market cap larger than Ford (NYSE:F). The company was valued at more than $25 billion, despite at that point not even breaking ground for its factory yet.
That said, it didn’t have to be Nikola. Investors have seen Nio (NYSE:NIO) hit all-time highs in July. Tesla (NASDAQ:TSLA) bombarded its way to a market cap north of $300 billion at one point, making it the most valuable automaker on the planet.
With so much attention on electric cars, why hasn’t Ayro rallied in the same manner?
Ayro Stock Is a Pump and Dump
Ayro didn’t IPO or come public via a SPAC deal. That’s not necessarily a problem, although it didn’t help raise much awareness of the stock before it began trading. That said, the way it came public is complex.
DropCar, which used to trade under the symbol DCAR, was a penny stock listed on the Nasdaq Exchange. It failed to meet the minimum requirements for the exchange and faced delisting. From there, DropCar entered into a merger agreement with Ayro.
The proposed deal was to dump almost all of the DropCar business. The deal would leave Ayro shareholders owning 80% of the combined entity, trigger “a 1-for-5 reverse stock split of the combined company’s common stock” and switch the ticker from DCAR to AYRO.
This just seems like an unnecessarily complicated way of coming public — particularly when there is so much enthusiasm for electric vehicle (EV) manufacturers.
A glance at the most recent 10-Q filing with the U.S. Securities and Exchange Commission doesn’t reveal a lot of details. The company says it faces risks from the novel coronavirus, while its balance sheet shows more assets than liabilities. However, it also reveals that it operates at a net loss while operating cash flow is in the red.
And while you’re navigating that 10-Q, sort through the discontinuing operations which include asset sales from DropCar.
Look friends, maybe Ayro shows us some legitimacy and changes our mind. But for the moment, there are too many red flags to sort through here. That’s especially true when we have very straightforward investment opportunities in the EV landscape. It doesn’t help that we don’t have any analyst coverage on Ayro stock.
Real World Problems
Beyond this strange tie-up, Ayro may struggle to fit in in this world. On the surface, yes, it fills an incredible niche role. Its products are designed for a smaller footprint, not driving up and down the coast. Think cruising around a campus, airport or hospital. It’s not meant to be a competitor with Tesla.
At a glance, that seems pretty reasonable and the fact that it’s an EV company makes it a bit more attractive.
However, the novel coronavirus situation changes things up a bit. Airports are not looking at putting in new orders with traffic down 75% year-over-year. Campuses have been disrupted, sending students home early in the spring semester. Questions still linger about the return to campus in the fall.
Hotels, resorts, governments — all are still struggling. The one exception here might be hospitals, but they sort of have their hands full at the moment.
If the fundamentals don’t turn you off, the chart just may. As you can see, because of its merger with a penny stock followed by what was effectively a reverse split, this thing has been all over the place.
There’s no trend, no key levels, no way to meaningfully trade Ayro stock. For the readers though, I will try.
A move below $4 likely puts the 200-day moving average in play. Notice how this key moving average has played a notable role in price action in 2020. Below it and bulls will not want to be long until it’s reclaimed.
On the upside, a move over the 20-day moving average and downtrend resistance — call it a move over $5 — and it’s possible Ayro stock rallies to the $7-$8 range. While possible, there are many other speculative plays out there that look much better than this.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.