(Bloomberg) – There is nothing in Blink Charging Co.’s finances to suggest that it is one of America’s hottest stocks.
He never recorded an annual profit in his 11 years of history; warned last year that he could go bankrupt; it is losing market share, pulling anemic revenues and affecting management in recent years.
And it is still a hot stock. Investors have offered Blink’s share price an increase of 3,000% over the past eight months. Only seven stocks – of about 2,700 worth at least $ 1 billion – have risen further over that time. The reason: Blink is a green energy company, owner and operator of charging stations that power electric vehicles. And if investors are sure of one thing in the craze that is sweeping the financial markets, it is that green companies are unmissable and mandatory investments of the future.
No action captures this euphoria better than Blink. With a market capitalization of $ 2.17 billion on Monday, its share of the company’s sales value – a common metric for assessing whether a stock is overvalued – has exploded to 481. For some context, at Tesla Inc. – the darling of the EV world and a company with a very rich rating – that number is just 26.
“Everything is wrong,” said Andrew Left, founder of Citron Research. “It’s just a beautiful name that caught the attention of retail investors.”
Citron was one of the few companies that bet against Blink last year, conducting short selling operations that would pay if the stock price dropped. It is one of several bets against stocks favored by the crowd of retail investors who were against Citron – with GameStop Corp. the most well-known – and led Left to declare on January 29 that the company was abandoning its search for short – selling targets. Short interest on Blink – an indicator of the amount of bets against the shares – fell to less than 25% of the floating shares, from more than 40% at the end of December.
For short sellers, one of the things that set off the alarm is that several numbers linked to Blink, including CEO and President Michael Farkas, were linked to companies that have been in conflict with securities regulations for years.
Farkas dismisses this and other criticisms made by the shorts. “There have always been and always will be opponents,” said Farkas by email. “When I founded the business, opponents questioned whether the move to EV was real. Now, as the value of our business grows, opponents tend to be short sellers ”.
See also: Bloomberg Intelligence Environmental, Social and Corporate Governance Control Panel
In sight
Making money from collection has historically been a losing proposition. In theory, a model like Blink’s that involves both selling equipment and charging user fees can become consistently profitable as government support accelerates the adoption of EV. But nobody has done that yet.
“This market is still very small and at an early stage,” said Pavel Molchanov, an analyst at Raymond James & Associates. “It will take some time for economies of scale to materialize.”
Even by very tolerant industry standards, Blink’s revenue is tiny, totaling about $ 5.5 million in 2020. ChargePoint Inc., which announced plans to go public through a special-purpose acquisition company last year, it generated $ 144.5 million in revenue in 2020, according to a January deposit. EVgo Services LLC, which is approaching a similar deal to go public through an SPAC, has a smaller charging network than Blink, but more than double sales – about $ 14 million in 2020 Despite the extremely different revenue figures, the three companies have a business value between $ 2.1 billion and $ 2.4 billion.
Blink warned in a May filing that his finances “raise substantial doubts about the company’s ability to continue operating within a year,” a disclosure required when the company does not have enough money on hand for 18 months of expenses.
“Electric is real. The stock prices of companies in the sector are not, ”said Erik Gordon, an assistant professor at the Ross School of Business at the University of Michigan. “The dot-com boom produced some real companies, but most of the overvalued dot-coms were bad investments. The electric boom will be the same story. Some large companies will be built, but most investors who pursue companies with absurd prices will cry. “
Still, the recent market boom has given Blink a new lease of life, allowing it to raise $ 232.1 million through a stock offering in January. Roth Capital Partners recently on Friday recommended buying the stock, giving it a target price of $ 67, 29% above its current level.
The shares fell 2.3% to $ 52.10 in New York on Monday.
The company’s prospects depend on exponential EV growth, and Farkas in January discussed plans to roll out some 250,000 chargers “in the coming years” and often touts the company’s ability to generate recurring revenue from its network.
Currently, the company claims to have 6,944 charging stations in its network. An internal map of Blink’s public fleet lists some 3,700 stations available in the United States. In contrast, ChargePoint has a global public and private charging network that is more than 15 times larger.
Unlike some of its competitors, Blink’s revenue model depends in part on increasing user fees, which for the time being remain in the “low-digit” range, insufficient to generate significant revenue, said Farkas during a earnings conference call. November. He told Bloomberg that usage will increase as EVs become more popular.
For most chargers in operation now, utilization is likely to reach 10% -15% to reach break-even point, although profitability depends on many other factors, such as the company’s business model, electricity rates and energy costs. capital, according to BloombergNEF senior associate Ryan Fisher.
Blink was one of the first market leaders among collection companies, but has lost its leadership and now controls about 4% of the Tier 2 public collection sector, said Nick Nigro, founder of Atlas Public Policy, a consulting firm and electric car policy.
Blink also acknowledged “material weaknesses” in his financial reports, which have been released in the archives of the United States Securities and Exchange Commission since 2011. The company says it has hired an accounting consultant to review its controls and is making the necessary changes.
Origin Story
The colorful history of Blink’s origin has been a prime target for short sellers. This dates back to 2006, when it was formed as a front company, New Image Concepts Inc., to provide first-rate personal consulting services related to hygiene, wardrobe and entertainment, according to a SEC document.
In December 2009, the company entered into a stock exchange agreement with Car Charging Inc. Farkas joined the company as CEO in 2010, after working as a securities broker and investing in companies such as Skyway Communications Holding Corp., which the SEC considered it a “bomb and eviction scheme” during the years when Farkas held shares. (Farkas said he was a passive investor, had no knowledge of any wrongdoing, and “was not involved in any way in Skyway’s activities.”)
In 2013, Farkas oversaw the purchase of $ 3.3 million of Car Charging from the bankrupt Ecotality, which had received more than $ 100 million in grants from the U.S. Department of Energy to install chargers across the country. The company later changed its name to Blink.
Since then, Blink has suffered from executive turnover, with three of the five board members leaving between November 2018 and November 2019. The company has had two chief financial officers and three chief operating officers since 2017. A former COO, James Christodoulou , was dismissed in March 2020. He sued the company, accusing it of possible title violations, and reached an agreement with Blink, who denied any wrongdoing, for $ 400,000 in October.
Financier Justin Keener, a former majority shareholder in Blink, whose capital helped the company’s listing on Nasdaq in 2018, and the company he operated in were charged last year for failing to register as a securities broker while allegedly selling billions of individual actions not related to Blink. He said he has since divested himself of Blink and now owns “a relatively small number of common shares” as a result of a warrant dispute settlement with the company. Keener denies the SEC’s allegations.
Farkas told Bloomberg that he severed all ties with Keener, was unaware of any ongoing investigations while they were working together, and was not aware of any Keener wrongdoing.
The increase in shares brought unexpected luck for Farkas, Blink’s largest shareholder. On January 12, after the shares reached record highs, he sold $ 22 million in shares, according to Bloomberg data. Farkas’ total compensation, including share premiums, totaled $ 6.5 million from 2016 to 2019, equivalent to more than half of the company’s revenue. Included in his 2018 remuneration were $ 394,466 in commissions for Farkas Group Inc., a third-party entity that he controlled and that Blink hired to install chargers.
Farkas said that his compensation is justified for having personally invested in the formation of the company and received for many years shares as a salary.
More recently, Blink board member Donald Engel followed the CEO’s lead.
He has sold more than $ 18 million in shares in the past two weeks.
(Updates the share price in the 15th paragraph and the market value in the fourth.)
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