Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why ElectraMeccanica (SOLO) Stock Is Down Today

By John Rosevear - Nov 30, 2020 at 2:50PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There's a lot of smoke, but is there any fire here?

What happened

Shares of Canadian electric-vehicle maker ElectraMeccanica Vehicles ( SOLO -6.45% ) were trading down on Monday, as investors continued to unload shares after a prominent short-seller called the company's business and valuation into question.

As of 2:30 p.m. EST, ElectraMeccanica's shares were down about 7.8% from Friday's closing price. 

So what

ElectraMeccanica's shares, like the stocks of quite a few other companies in the electric-vehicle space, have drawn considerable interest from auto investors hoping to profit from the widespread adoption of electric vehicles in coming years -- and those who are mindful of the huge run-ups we've seen over the last couple of years from companies like Tesla ( TSLA -6.42% ) and NIO ( NIO -11.19% ). 

Both Tesla and NIO, however, are considerably more established than ElectraMeccanica, which offers a quirky three-wheeler called the Solo. 

A red ElectraMeccanica Solo, a tiny 3-wheel electric car.

ElectraMeccanica's Solo is a single-seat 3-wheel electric vehicle. Image source: ElectraMeccanica Vehicles.

As prominent short-selling firm Citron Research bluntly pointed out on Twitter on Nov. 20, ElectraMeccanica has a tiny research and development budget and so far has only delivered a few vehicles. 

While it's true that short-sellers have an interest in presenting the companies they short in the worst possible light, it's also true that there doesn't seem to be much fire behind ElectraMeccanica's smoke.

That's why the stock chart over the last week looks like this.

SOLO Chart

SOLO data by YCharts.

Now what

My take is that auto investors are absolutely right to be looking for opportunities among the many upstart electric-vehicle companies that have come to our attention in 2020. I have little doubt that some of these companies will succeed in staking out sizable niches in the global market for electric vehicles that's now emerging.

I do see reasons to doubt, however, that ElectraMeccanica will be among them. Trade carefully.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Electrameccanica Vehicles Corp. Stock Quote
Electrameccanica Vehicles Corp.
$2.61 (-6.45%) $0.18
Tesla, Inc. Stock Quote
Tesla, Inc.
$1,014.97 (-6.42%) $-69.63
NIO Inc. Stock Quote
NIO Inc.
$32.15 (-11.19%) $-4.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/04/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.