I have never understood why SPACs aren't illegal. Even when someone knowledgeable in finance describes it to me on the surface, in layman's terms, it appears sketchy. A SPAC is basically a way for investors to dump a company with no real business model, yet, onto the unsuspecting public. It relies heavily on pump and dump strategies to raise funds before its special opportunity time runs out. While you can't time the market this seems like a vehicle designed to do exactly that. Its just odd.
Unfortunately, SPACs are legal (so far) because they are a Frankenstein's monster made of legal body parts.
There's nothing illegal about creating a public company, no matter how stupid it is, if your finances are above broad. Financially, SPACs are as simple as a public company gets: practically take people's money and hold them in a big pot.
There's also nothing illegal about a public company acquiring or merging with a private one, although I believe this is the Achilles' heel of our current legal system: mergers generally don't require the same level of minute disclosures an IPO does.
Clearly, this is a regulatory arbitrage, just like a lot of our "innovations" in the past decade, fueled by a near zero interest rate. The way to move forward would be to take another look at our regulation and close the arbitrage. Otherwise, next time there's a low interest rate environment, I can guarantee you there will be another garbage SPAC boom.
Right, the obvious fix is not "make it illegal!"; but rather to have the regulatory/disclosure/etc. requirements for a SPAC more similar to those of an IPO.
(There's also a good argument that IPO requirements are too extreme, as demonstrated by many companies that would previously have gone public, staying private. Perhaps the right trade-off is to make both IPO and SPAC processes have a more well considered, moderate set of requirements.)
While I'm not a fan of SPACs, I think this is going to far
> way for investors to dump a company with no real business model, yet, onto the unsuspecting public.
The "unsuspecting public" are people who bought a stock with full knowledge that they don't know what they'll end up owning. The "unsuspecting public" is a mischaracterization, people who invest in SPACs aren't doing so unknowingly.
SPACs aren't automatically part of the typical portfolio (like, say, the S&P 500). People who own SPACs went out of their way to buy them.
I completely agree with your other points, but we have to acknowledge that the victims of a poorly executed SPAC merger isn't your blue collar worker, it's people who sought out a highly speculative asset, and that's what a SPAC is.
There is still a simple solution to the "SPAC problem" - don't let them list.
A SPAC is effectively (and I'm simplifying here for brevity) like a Private Equity fund. However, those are limited to accredited investors, and the general public can't buy into them.
SPACs could (should?) be limited in the same form. By prohibiting them from listing, it's the smallest regulatory change that solves the issue of unknowing investors buying something speculative without knowing it's true risks.
How exactly do you intend to do that? Remember the law is like code, not something you can rearrange on a whim.
There's no legal distinction of a SPAC. It's just a company like any other listing on the public markets. The better solution is to increase reporting and listing requirements for the companies they're merging with. The merger process should become exactly as it is with traditional IPOs; S-1 filings, roadshows, lockup periods, etc.
> There is still a simple solution to the "SPAC problem" - don't let them list.
OK - but how are you going to discriminate between SPACs and other c-corps? I don't think a porn style "I know it when I see it" test is going to work here.
It’s actually pretty easy, no? A SPAC has requirements that it has to meet - no operating business, only nominal assets, a limited period of time in which it must transact.
But like another poster observed, not letting a SPAC list completely obviates the sole purpose of a SPAC (which I personally think would be an excellent outcome).
This applies to all SPACs not just EV SPACs. In the traditional IPO route the underwriting firm will have performed some due diligence - from a reputational risk standpoint. Without that element, SPACs were always going to be attractive to firms that had zero substance.
Rivian actually had a really good quarter. They're still losing $32K per vehicle but this number has been coming down substantially every quarter so the margins are improving and they're almost at a break-even. Nikola secured a grant from California Transportation Commission for $42M recently. This one was very shocking because they were basically a scam company a couple of years ago.
Because they’re not. Nowhere close. Although 32k/vehicle includes all fixed costs.
By my calculations, with current ASP and marginal unit costs, they need to sell about 35k R1 vehicles per quarter to achieve positive gross margin. For reference they sold about 12k last quarter.
So, yea. I don’t think they’ll get to positive GM before burning through all their cash.
Edit: I should give them more credit. I didn’t think they would ever achieve positive marginal unit economics, but the last two quarters have showed that they have.
For an EV manufacturer to truly succeed, it's not just about making electric cars. They also need to heavily focus on the recharging network and infrastructure. The car is just one piece of the puzzle. The real challenge? I think is setting up a dependable recharging network cover the entire region/country.
I think a more fundamental problem for these companies is the actual manufacturing of the vehicles. It's easy (relatively speaking) to develop a one-off prototype, it's much harder to scale that up to build 1000/cars/month for example.
Why, with charging standards? It's not like we needed ford gas stations, Honda gas stations etc. For Tesla it made sense since they were the first movers, but I think everyone else will just rely on the infra provided by 3 or 4 big players
Just because Tesla has a recharging network and a car company doesn't mean others need a similar setup. It's fine for them to be separate companies. Just make sure your car supports ISO 15118 Plug and Charge.
It may be the case that it is easier to get a return on investment on installing chargers than building cars. If you go down that route, you might want to strike deals with car companies and their dealerships to include setting up your charger network on cars when they are sold.
Seems to me that the EV car market is going produce very few winners. Possibly killing off the old guard completely.
Tesla is a given. The Chinese manufacturers (like MG) seem to be quite successful. The old European and US car makers are however failing quite badly. What they produce is hot garbage at a huge loss per car.
> The old European and US car makers are however failing quite badly. What they produce is hot garbage
That's not what I've seen in the numerous reviews I've read. Plenty of others get reviews similar to those of Tesla both from reviewers and their owners.
Tesla has got by far the best charging network, and their drivetrain is top notch, but the car shaped object they put that drivetrain in is not great. The old car makers seem to be learning how to make good electric drivetrains faster than Tesla is learning to make the rest of the car.
> at a huge loss per car.
Aren't you jumping the gun a bit? It took Tesla 12 years from the time they started actually shipping cars to the time they started having profitable years.
I thought that the point of EV's is that there is no drive chain?
The issue for the big car makers is that their differentiation is in the ICE drive chain... Making that thing to any sort of modern standard is very difficult, making millions of them at the right price is really difficult.
Electric motors in the wheels - not so much.
So, the established players have to find reasons why consumers will buy their implementation of a generic technology. The potential ones are specialisms, brand & service. Service is difficult because EV's don't need much. My 4 year old tesla has had 1 tyre repaired and a lot of washer fluid poured in the front. Specialisms will include things like bullet proofing, radical looks... Brand will be available to Ferrari, Rolls-Royce, Bentley, Porsche, and few others but these will be small scale - although overall they will add up to be somewhat significant. But companies like Ford, GM, VW, Mercedes, Renault, Toyota and Honda are really screwed. Even Tesla! Personal mobility is going to be commoditized, margins are going to go, costs are going to have to be cut radically
There's still a "drive train" in an EV, it doesn't just magically move itself. The DC power from the high voltage battery gets inverted into AC with an inverter driven by logic from a computer. The AC output of the inverter goes to drive the windings of the motors which influence magnetic properties of the stator which interacts with the rotor to produce torque on a shaft. That is then usually connected to some kind of usually fixed-gear gearbox and differential system. That then finally turns the wheels.
And that's just moving the car forward. There's still a suspension, geometry of the wheels and suspension, balancing torque on front and rear wheels, weight distribution, steering, and more that all influences how a car feels as it drives.
Pretty much all of these things can influence a car's performance and how one perceives the car. A better quality inverter or better logic driving it can lead to better performance or efficiency. Tuning the windings and rotor magnet designs can change efficiency and torque curves at high speeds. Obviously, gear ratios can change things as well.
> Electric motors in the wheels - not so much.
Very few EV cars actually put the motors in the wheels. Tons of EVs only have a single motor in them, the extreme majority have 1-2.
Think of drivetrain as all the magic that happens between power generation and what your wheels do.
You have can the same batteries (or engines) in a car and get widely different driving dynamics. How does it put power down to the wheels?
EVs are fantastic 0-60 machines in a straight line but the luxury brands you listed care about more than that (including status, of course). How does it corner? What happens when I floor the accelerator at 70mph? Does the car feel like a wild animal you're taming or a machine that feels like an extension of your body?
Then you get to the other differentiators of interior design, extra tech capability, NVH management, etc. I'm excited for those areas to see some more useful innovation once 0-60 times stop being interesting.
I think vehicles like the Prius, Leaf, etc are for the same audience as the corolla, altima, etc buyer. The playground for those who care about a particular 10% of their driving/badge experience will always exist regardless of what powers the vehicle
Well, my Tesla is much more fun than a boxster to drive - just not as noisy.
Also the magic of drivechains is in the magic. Electrical connections and software are much much easier to deliver than gears and other precision manufactured physical components. Replication of software over 1000000's of instances is trivial. Replication of a precise physical component is hard.
Like it or not, ICE cars still rule, and given their prices and lack of serious used cars markets so far with adequate pricing its not changing soon (I mean every BMW car I've bought was 20-25% of the price of new and was >95% of the car, so far they lasted 11 years / 150k km without any issues, I am not going to waste more money on cars regardless of technology). So sales of traditional ICE car manufacturers in electric space is not so important, at least for now. Given how much we destroy earth by mining all EV stuff I don't consider this as eco-friendly technology neither, at least not yet.
Where I live (Switzerland) they don't plan to phase them out anytime soon. All EU goals will shift to later in future, everybody understands that, including politicians pushing for them.
Also, Tesla had some good momentum in the beginning but right now they are just another e-car manufacturer among many, say Porsche beats them on everything actually important in car (apart from price, but then we talk about premium brands). So I wouldn't bet seriously on its future, it can be stellar or can flop ie if EU subsidies dry up.
Prices are absolutely changing and the used car market for EVs is ramping up.
Family member was looking for an electric car, but found new ones still a bit too expensive. There have been discounts from manufacturers. They decided to go for used. Bought a VW ID.3 for 23k Euro with 16000km. That's a car from 2 years ago. No crashes, battery still at 97% capacity.
Yeah, that's type of car I am willing to spend max 6-7k used, in OK condition. Of course it won't be 2 years old, thats fine. That's the prices I am talking about.
That's fair and I'm not suggesting it's perfect. Even used EVs are expensive but it no surprise given the initial cost.
Originally, that car sold for around 40k. That's a ~50% drop in 2 years and that car wasn't an outlier. Stands to reason that with advancing age and ever cheaper EVs we will see cheap used ones in your price range in a few years.
> The old European and US car makers are however failing quite badly. What they produce is hot garbage at a huge loss per car.
VW Group (VW, Audi, etc.) seems to be moving quite well into EVs, I don't understand how manufacturers with a huge know-how to manufacture ICEs could be taken as "failing quite badly" in a market that's barely 5 years in the mainstream. ICEs are much more complex machines to produce than EVs, battery tech is something that most automakers have gotten into.
I think it's still too early to call shots like that, Tesla is still holding on its almost-first-mover advantage but it isn't a given it will stay that way when the competition increases. And competition has been increasing quite substantially.
It sounds reasonable but people said the same thing 5 years ago. What year will I see the legacy automakers utilize their advantages to sell more electric vehicles than Tesla? I actually feel in 5 more years people will be saying the legacy automakers never had a chance because they were too set in their ways.
> What year will I see the legacy automakers utilize their advantages to sell more electric vehicles than Tesla?
The EU was supposed to vote for the end of the sale of any ICE vehicle by 2035. I don't know where the final vote is but several manufacturers, including Mercedes, already said they'd stop producing ICE before 2035.
It is coming. I'm in the EU and I do see 100% EV cars from the VW group on the road, just as I see 100% EV BMWs. And they're not all stuck on the side road or I'd see them.
I think it's really a bit early to call all these legacy carmakers dead.
'legacy automakers' have been making EVs and Hybrids for years, and even long before Tesla was a thing (I've been to Geneva motor show enough times to have seen them).
What they have been doing is milking their petrol & diesel markets for as long as they possibly can. Why cannibalize your existing market for EVs when you're still selling plenty of the old cars, until you have no other choice?
Once they can't make money off petrol anymore, those companies will very quickly pivot to EVs and are currently more than technically capable of doing so. And they'll say 'thank you very much Elon for educating the public in what it means to be an EV owner, and what infrastructure is needed to support them. We'll take over from here'.
5 years ago major automakers didn't have full lineups of EVs already in production. Now they have, it's heavy industry, not tech, things take a while to R&D and ramp-up to full-scale production. Now there is full-scale production from multiple manufacturers, it only gets easier from here, maybe another 5 years is a good waiting time to see clear trends emerging.
You got a bit confused, stating something is not given isn't sign of confidence, rather sober analytical approach... Confidence is parent stating the opposite, without anything like crystal ball to back it up, while host of others don't agree
The comment states Tesla performing well in the future is a given, a guarantee it'll exist in the future. We don't know what will happen in the future, I wouldn't say "x company existing in the future is a given".
It'll probably keep doing very well. It may have some sudden event happen that makes it stumble. I wouldn't even state that the future of transportation in 20-30 years is a given.
I wouldn't bet against Tesla in the next decade or so, but I wouldn't state its future performance is a given. You know, that whole "past performance does not guarantee future results" thing your broker keeps chanting. Unless you happen to have a crystal ball or some kind of time machine, in which case I'd like in on that.
Tesla annual net income for 2022 was $12.58B, a 127.79% increase from 2021. By comparison, Ford Motor annual net income for 2022 was 1.98B, a 111.04% decline from 2021. Please just stop dude.
I'm not gonna waste my time arguing company financial statements with someone who doesn't know the difference between gross and net profit. You can have the last word. Have a nice day buddy.
You can quibble whether or not Tesla will continue to win at the scale it has, but it definitely doesn't seem likely to go bankrupt at the speed of a $6/share SPAC-boosted EV startup. It just doesn't really bear comparison to the other EV companies out there. It is not a startup, and has been publicly traded plenty long enough. Neither does it make sense to compare it to the old-guard ICE companies, which don't yet have their sea legs.
Any company can fail (for a fairly broad definition of "fail"), given time, but there's no practical likelihood of Tesla suddenly going bankrupt in the near future.
To anyone else who is not north-american: SPAC has nothing to do with PAC, the political tool/org/whatever it is. My brain for some reason confused the two.
