Siegfried Eggert of Grizzly Research presented his thesis for SPI Energy at ValueWalk’s fourth Contrarian Investor Virtual Conference. He describes the company as a “perpetual” and “egregious pump and dump” as its stock “has had a date with almost all the hottest trends in the recent two years, including Cryptocurrency, CBD and now Electric Vehicles.”
Q3 2020 hedge fund letters, conferences and more
"Perpetual pump and dump maniac"
Eggert said the story around SPI Energy's stock is a repetitive one of pumping the stock on news about a "hot strategic establishment, followed by aggressive PR campaigns and ultimately a failing value proposition."
The company was founded without clear strategic initiatives with a focus on photovoltaic solutions for business, residential and government utility customers and investors. According to Eggert, SPI's core business and been steadily losing money and declining. He suggests that the company may have resorted to pursuing whatever is hot in the market after being unsatisfied with its stock performance.
Eggert noted that in early 2018, the company launched its cryptocurrency platform, but he doesn't believe it has ever been operational" as it "contributes abysmal revenue." Then in September 2019, SPI Energy launched its hemp and CBD business, again following it with multiple PR campaigns, but the business never came to fruition. It was recently reported that the company's growth facility would probably be shut down.
In September 2020, SPI Energy launched EdisonFuture, a company that focuses on the design and development of electric vehicles and EV charging solutions. Eggert presented evidence that the EV business will probably fail too.
SPI Energy's EV business might fail too
He found that SPI Energy's main Chinese EV partner, Shaanxi Tongjia Automobile, doesn't even have any current operations, and its business was halted in September 2019. Eggert's site visits and calls with distributors confirmed his suspicions. He believes Shaanxi Tongjia is in bankruptcy without any prospect of resuming production.
Eggert added that EdisonFuture has no background at all and doesn't even appear to exist. The Grizzly team couldn't find the company in any government database. They also contacted the Fresno County Clerk and found that no pending companies were called EdisonFuture.
SPI said in a press release that EdisonFuture will complete assembly of the electric vehicles in Fresno. When the Grizzly team asked SPI about the location of EdisonFuture, they received no response. In fact, when the firm's investigator visited SPI's headquarters in Santa Clara to try to get a response, they found an empty office and no sign of activity.
Eggert believes SPI Energy could be referring to the facility it established to produce CBD and hemp as the location of its EV factory. However, even if the company were to transform the CBD extraction facility into an EV production facility, it would be an expensive and laborious process.
Other problems with SPI Energy
Further, Eggert learned that SPI Energy's CEO is a wanted fugitive in China and that he was involved in another public company that went bankrupt before joining SPI. He also found that the company has numerous convertible bonds in default, which he said suggests "poor capital management, poor investment decisions and poor operations."
Eggert also said SPI Energy's current auditor has such low credibility that it is not allowed to conduct audits in China. And as if the company's core business wasn't weak enough, 80% of its core solar revenue is at risk due to a lawsuit filed in May.
"We see a clear pattern of pump and dump, riding on trends," Grizzly Research's report states. "With a negative book value of equity, we believe the stock will at best return to previous levels, at worst quickly become another one of the CEO"s bankrupt companies."
You can read Grizzly's full short report on SPI Energy here.
This article first appeared on ValueWalk Premium.
