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Why CBAK Energy Stock Just Dropped 6%

By Rich Smith - Jan 11, 2021 at 1:13PM

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CBAK's news today is good, so why is the stock down?

What happened

Shares of Chinese battery maker CBAK Energy Technology ( CBAT -9.41% ) stock are down 6.5% as of 12:50 p.m. EST Monday, and they're falling on no obvious bad news. More than that -- they are falling despite what appears to be pretty good news.

So what

This morning, CBAK announced that it is partnering with No. 4 Chinese domestic automaker JAC Motors in a three-year strategic agreement to jointly develop "cylindrical lithium-ion batteries and battery packs, including the 46800 model," for use in JAC electric cars.

As CBAK noted, in addition to its role as a leading Chinese automaker on the domestic market, JAC has exported over 640,000 vehicles to the international market," which seems to imply the ability for CBAK to expand its reach internationally as well.

Cartoon characters confused by stock chart arrow falling and crashing into floor

Image source: Getty Images.

Now what

And yet, CBAK stock is down on the news. Why?

Well, investors may have reservations about such details as the fact that the press release didn't include any statement on supply volumes or the value of the contract to CBAK. The company also wasn't very clear on when production of the new batteries would commence, or when they might begin finding their way into actual automobiles being bought by actual consumers. While that is certainly implied in the press release, what CBAK actually said was only that the companies will be "broadly ... working together ... to advance the technology of automotive power batteries and actively explore the implementation of a partnership model that is both effective and capable of advancing their businesses going forward" -- which sounds kind of fuzzy.

Absent any other clear reasons for today's declining stock price, I can only conclude it's the lack of specifics that has investors concerned that this deal may not be as big as first meets the eye.

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.

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CBAK Energy Technology, Inc. Stock Quote
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