Daily Brief: EV Companies Could Be About To Raise $100 Billion, But They Can’t All Be Winners…

Daily Brief: EV Companies Could Be About To Raise $100 Billion, But They Can’t All Be Winners…

over 2 years ago3 mins

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Bank of America reckons there’s about to be a surge of initial public offerings (IPOs) in the electric vehicle space, but overzealous investors might want to tread carefully…

What does this mean?

Electric vehicles (EVs) are only getting more popular as time goes by, and companies in the sector – car, battery, and charging station makers alike – have been trying to raise cash to meet that rising demand. So they’ve increasingly been listing on global stock markets via initial public offerings (IPOs), and investors have been keen to get in on the action. Just look at Rivian: the electric truckmaker raised nearly $12 billion in the biggest IPO of the year earlier this month, and its shares are already 47% above their initial listing price. And since other EV companies are set to follow in its auspicious tire tracks, Bank of America’s made a bold prediction: it reckons the industry could raise a total of $100 billion from IPOs by 2023.

Electrifying

Why should I care?

For markets: This is getting silly.

Investors have pushed EV valuations to all-time highs, with industry leader Tesla alone having seen its stock price climb nearly 1,600% in the last two years. But Research Affiliates has warned that this might be a sign of so-called “market delusion”, where valuations in a hot industry all rise in sync even though the rival companies can’t possibly all be winners. And when that fever breaks, you’d better hope you’re holding the right stock…

Tesla stock
Source: Google Finance

The bigger picture: The US revs its engine.

Someone needs to power all those EVs, which is why battery-makers are taking steps to keep up too: the top 10 in the world are expected to nearly triple their combined manufacturing capacity by 2022, according to Bloomberg. All of those are headquartered in Asia, with China alone making 80% of the world’s batteries. But the US is trying to change that: it passed a bill last week that’ll provide $6 billion in grants to battery-makers and their materials producers.

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One Measure Of US Inflation Hit A Two-Decade High Last Month

US image

Data out earlier this week showed a key measure of US inflation rising at its fastest since 1991 last month, so Americans can hardly be blamed for cutting a few corners this Thanksgiving…

What does this mean?

The US has had a lot on its plate recently: supply chain disruptions have been pushing up costs for businesses and, in turn, their customers, while labor shortages have continued to drive up wages, which has increased demand for – and the prices of – a dwindling supply of goods. All in, then, a broad measure of inflation was up 5% last month compared to the same time last year. And even stripping out unstable costs like food and energy, the measure still rose by 4.1% – the biggest jump in 20 years.

Inflation
Source: The Wall Street Journal

Why should I care?

For markets: Thanks for the support.

The Federal Reserve’s (the Fed’s) plan to reduce its $120 billion bond-buying program by $15 billion a month kicked off this month. But this data has got Deutsche Bank economists speculating that the Fed will double that amount from December onwards in a bid to keep spiraling inflation in check. That would see support disappear completely by March next year, removing a big source of demand three months earlier than the central bank originally planned. So expect bond prices to keep dropping and yields (which move inversely) to keep climbing from their current lows.

Zooming out: A debt of gratitude.

This Thanksgiving will definitely be one to remember: new analysis from the Financial Times has shown that Americans had to fork out 25% more on average for their typical festive food than they did before the pandemic. And since food prices could keep rising well into next year, economists reckon Thanksgiving ‘22 might end up being 10-20% pricier still.

Thanksgiving dinner price
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