$LEV (Lion Electric): Huge growth and massive cost to short (Cost of borrow 130-160%)
Who is Lion Electric?
- The biggest pure manufacturer for heavy-medium EV vehicles. They are currently best known for their EV school buses with over 390+ of them on the road as of today.
- Lion positions itself as a leading OEM in transportation electrification in North America
- Currently 3 buses (1 shuttle bus and 2 school buses) + 4 trucks (class 6, class 8, refrigerated and refuse) that are READY TO PRODUCE AND SELL. Yes even your Trash can be picked up by Lion right now.
Clear goals and plans, leading to phenomenal growth
- Lion Electric announced in their last earnings that as of Q1 2021, they have 817 orders, for a total value of $225M. They also mentioned during earnings that 500+ of theses orders were received in Q1. This is massive considering that they only sold about 100 buses in the ALL OF 2020 year.
- Huge project to open the biggest heavy-medium EV manufacturing plant in Illinois, operational as of mid-2022 with a maximum production capacity of 20 000 vehicles a year. With the support the the governor and tax a tax abatement deal for 5 years. You can bet your ass that this will be supported as "made in America"
- New battery manufacturing site ready as of 2023 to produce up to 14 000 batteries a year for they vehicles. Funded by BOTH the Federal and the Provincial governments in Canada (fund of $100M)
- Employee numbers continuing to grow, now over 650 and recruitment continues
Deals and connections
- The list of partnerships with big companies continues to grow
- Amazon purchased 10 trucks last year and has a contract with Lion to purchase up to 2500 trucks by 2025.
- Amazon also has the possibility to own about 15% of LION electric if they spend 1.1B on the trucks. And there is a high probability that they will (see below)
- Pride(big truck enterprise) as a purchase order of 100 trucks = potential for more orders if product is liked
- CN (huge Canadian transporter) recently Purchased 50 trucks – again there is a chance to increase size of order later
- First student with 260 buses for QUEBEC only. Guess what? they own 43 000 buses across Canada and USA which will slowly need to be changed into EV.
- Deal with Heritage for 100 Refuse EV trucks
How is the quality?
- A Canadian firm (Desjardins) which has a PT of 26$ short term and up to 40$, says that they contacted 10 big fleets of school buses for their DD and that Lion has is the best on the market
- Twin Rivers Director of Fleet operations calls the buses the "Rolls Royce and the Tesla of school buses": link
- California is a big fan of Lion electric almost all of the funded EV school buses are awarded to Lion:
- Lion just visited the capitol and continues to tie links with the state
- Finally AMAZON. Do they like the trucks? Well before the Operations Manager at Amazon recently shared the truck on LinkedIn and the reactions were all positive. Stated that "many more come"
This is all nice but what about the short interest?
- The Short interest of the float is really hard to find for today’s date. As of may 28th, 5.68M was short on the Free Float of 39M. (152M shares are currently locked up)
- However the daily short volume in the past few days has been WAY higher:
- The cost to borrow IS INSANE and is an indicator and its hard to find shares to short! There aren’t many shares to short because most investors are super long on this stock. So shorts are paying huge amounts. For reference, AMC has a cost of borrow of 4%.
- Ortex shows a cost of borrow of 161% for LEV, on my broker the cost to short is 130%! This is INSANE. It basically means that a movement of price towards the upside will be very hard for shorts to sustain and will force them to cover very fast.
- To short 1 share: pay 7cents a day. To short 10k shares = pay 700$ a day.
- Lastly, the stock has been on the very nice upwards movement looking at the daily chart after cooling off from the recent peak of 23.5. If we break through the 24s we have a very nice short at seeing the 30s like earlier this year.
- Huge growth EV company with clear plans and goals + cash on hand
- Supported by Canadian and USA government with funds and tax abatement
- Top class in EV school bus sector with the trucks growing popularity rapidly
- Key customers (Amazon, IKEA, Pride, CN…)
- Decent amount of short (5.86M+/38M) but likely MUCH higher in past few days
- INSANE cost to short the shares (130-160%!) since all shares are in the hands of longs = shorts will have to cover FAST
Disclaimer: Im long since early days, this is not financial advise. Do your own DD and invest safe.
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June 11, 2021 at 09:42AM