Did Investors Get Too Excited About the LiveWire SPAC News?

Rivian Automotive (RIVN -3.62%) wins Motor Trend's "Truck Of The Year" award. Peloton responds to a fictional character dying on one of their bikes with a new commercial. Motley Fool analyst Jason Moser analyzes those stories and discusses the hidden upside of "seller's remorse."

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Editor's note: After this podcast was recorded, Peloton removed the ad featuring Chris Noth after allegations against him of sexual assault were published. Noth denied the allegations. 

This video was recorded on Dec. 13, 2021.

Chris Hill: It's Monday, December 13th. Welcome to Market Foolery, I'm Chris Hill. With me today, Jason Moser. Good to see you.

Jason Moser: Howdy howdy.

Chris Hill: We've got portfolio strategies to discuss, and yes, we're going to talk about the Peloton ad, [laughs] but we have two quick items from the automotive world to get to. Let's start with Harley-Davidson (HOG -15.74%). Shares up nearly 20 percent after announcing the company is merging its electric motorcycle unit, which is LiveWire. They're going to merge that with a SPAC. So LiveWire is going to have an enterprise value of about $1.8 billion. It's going to trade on the New York Stock Exchange under the ticker LVW. Putting aside the SPAC route, is Harley-Davidson a 20 percent better company today as a result of this move? I'm trying to understand this move.

Jason Moser: I would say probably not, but it does create potentially an interesting opportunity for investors. You have to look past, there are couple of poor performances that you have to really look past. First, we look past the poor performance of SPACs year recently. Generally, the glass half empty perspective on them right now. That's understandable in a lot of cases, right? A lot of these SPACs, they've earned that skepticism but then you also have to look past, I think, Harley-Davidson's stock performance as well. I mean, this is not a company where it's paid to be an owner over the last five-years, stocks down going into today, I think around 20 percent. So this might have just about even over the last five-years breakeven, but I mean, the markets outpaced it over that stretch considerably, so it's not been the greatest investment in the world, obviously. I think what this does though, the SPAC situation, while many of them are in a bad place, they do give you the occasional opportunity to become an owner of what one day will be a good business. 

I think it's about setting expectations appropriately and understanding that with these SPACs, you're getting in way earlier than probably normal. I think that's the case here, but I do understand the excitement because it feels much like with electric vehicles. This is sort of where the puck is headed, so to speak. Electric vehicles extend far beyond just cars and we're seeing that play out with situation like this here with LiveWire. To try to get an idea of the opportunity, I looked back through Harley-Davidson's 10K just to get an idea of the LiveWire part of the business. They only break it down so much but if you look at their unit shipments in 2019 versus 2020, overall, unit shipments for Harley, there were 214,000 in 2019 versus 145,000 in 2020. Now, LiveWire units are included in this little sub-section called cruiser motorcycle units that they break out. Those cruiser motorcycle units make up about 35-37 percent of that overall unit number that they report. 

That cruiser motorcycle units isn't just all LiveWire, it's a few different types of bikes and so maybe that LiveWire representation is a third of that 35 percent or so. You may be thinking about a third of the 55,000 bikes that were in that cruiser motorcycle unit, maybe a third of the 55,000 were LiveWire, or could be, and that gives you maybe an idea of how many bikes you're talking about. It's going to be the first public EV motorcycle company in the US. It's going to have that reputation with Harley to lean back on, that expertise with Harley to lean back on. It's going to be well-capitalized obviously, thanks to the SPAC route. So there's a lot of potential there. I don't know that I would necessarily want to jump into this one right at the get-go, but I certainly see some potential.

Chris Hill: Well, we'll wait for their first report as a public company and hopefully get some more color there. Speaking of electric vehicles, Rivian automotive got some good news this morning. MotorTrend named the R1T their truck of the year. I don't want to overreact to this. Certainly, the market is not overreacting to this because this seems like it would be even better news if they were cranking out these vehicles and getting them on the road to people. That's not the case, but from a marketing perspective, this is a great feather in their cap, isn't it?

Jason Moser: It absolutely is and I think it's very easy to look at Rivian today and dismiss it because it doesn't make any money. I'm not talking about profits, I'm talking about revenue, man. This is a company that is just getting started and it just happens to be a publicly traded in a $100 billion plus market cap. That tells you that, clearly, this company is not being valued on fundamentals whatsoever, it's being valued on promise and this is a sign that at least there is a promise there. I think it's easy to see this headline and just think, whatever, MotorTrend truck of the year, whatever. I would encourage anyone out there, any investor out there to go to the MotorTrend article and understand the why, as to why this truck has perceived this award because this isn't just like a headline. If you google these three words, just google Rivian then motor then trend. Spaces between those three words. If you google Rivian motor trend, that will take you right to this article.

Go read that article, I think from an investor's perspective, it starts to make a little bit more sense because you understand why this truck has received this award. To me, again, this is a business of Rivian that is being valued clearly on promise, not fundamentals, but this type of award and I think further when you read the MotorTrend case, you start to at least see that promise. Chris, this is a quote from this piece. It says, "Although Rivian deliberately designed the R1T," that's the truck. "Although Rivian deliberately designed R1T to appeal to a wealthier, active-lifestyle audience rather than the blue-collar crowd, the truck isn't limited by this decision. As evidence, it can haul hay bales and pull horse trailers." Chris, I'm in. I am in. Let me tell you what, I think they did a great job putting this case together. It is a marrying of form and function that really impressed them. I'm not sitting there telling that Rivian is a screaming buy today but I think for a company that is being valued purely on promise, like you said, this is a very, very good feather to have in the cap.

Chris Hill: I get the comparisons to Tesla, but I will just point out for people who are like, "This is how Tesla started out." That may be true. Tesla didn't start out with a evaluation of a 100 billion dollars.

Jason Moser: No, it did not.

Chris Hill: Think whatever you want about Tesla. When it was at this stage, when it was at the pre-revenue stage, it wasn't a public company being valued by the market at a $100 billion. Again, this points to the potential for a bright future for Rivian. It's already an incredibly expensive stock given where the business is.

Jason Moser: It is, and I think there's a Tesla effect here. I think there is a Tesla effect similar to a halo effect. When you see a company that actually is putting something up there and if you look at their truck next to Tesla's Cybertruck, why anybody would buy that cyber truck is beyond me. I'm sure they're going to be some folks out there that do but like Rivian has made a good-looking pickup truck and it's fully electric. There's a lot to be said for aesthetics when it comes to cars, and it seems like Rivian is onto something.

Chris Hill: HBO Max has a new series called And Just Like That... It is a spin-off, an extension of, it's basically built out of the universe of Sex and the City. For anyone who hasn't seen that show and wants to this is a spoiler alert. I don't know what the Venn diagram looks like for Market Foolery listeners and people who are interested in Sex and the City spin-offs. There's probably something there, but spoiler alert, because we're going to talk about the first episode. Those people have hit the pause button or gone away altogether. Apparently, in the first episode of this show, one of the characters played by Chris Noth. His character's name is Mr. Big. He's getting a workout on a Peloton bike, he has a heart attack, and he dies. The woman he is dating doesn't immediately call 911. I don't know. That's up to the writers to decide but anyway, he is on a Peloton bike, has a heart attack and he dies. 

Peloton, to their credit came out with a creative commercial soon thereafter, and based on everything I've read, it seems like it is in response to this ad because there were people, I think it was last Thursday or Friday, it was being talked about in the financial media as a Peloton bike killed a guy in a fictional universe [laughs] and that's just adding to the woes of the underlying business of Peloton. So they come out with this ad where Chris Noth is shown to be alive. It's a Peloton ad, it's voiced by Ryan Reynolds. It's Chris Noth and Jess King who is the woman, who is the Peloton instructor. Having Jess giving Peloton and their marketing departments some credit, let me raise this, Jason. Every indication is that Peloton came up with this ad in response to this because every indication is that Peloton did not know how their product and their instructor were going to be used, how they were going to be featured in this show. I think if you're a Peloton shareholder, that should be just a tiny bit of concern that they don't have that part of their business locked up.

Jason Moser: I'm not the biggest fan of Peloton. I'm not like some staunch bear. Although I did say in our recent Motley Fool Money Thanksgiving special that this was a stock you'd probably want to avoid. I feel like they just they have a ceiling more or less. But it's amazing to see. I don't know that anybody would have ever really thought that the story line in a show could create this type of reaction. But I think it also speaks to the position that Peloton's in right now. I think if the stock were trading at or near all-time highs like so many of these other businesses are out there today, probably would've even given it a second thought. It will probably been kind of laugh it off. The businesses clearly in a bit of a different position now, though. This is something where I feel like they actually needed to respond in some way. I actually think they responded the right way. 

I mean, this was a very tongue in cheek response to it. It's played along with the joke. It is fiction after all, this is just a TV show, and I think most people are able to put those pieces together. Not only do I feel like they did the right thing and responding to it. I think they responded to it the right way. They were able to laugh a little bit at themselves, put together a clever commercial really quickly utilizing the accurate played the character in the show. From a consumer's perspective, I think it's probably all is well but ends well, but it does speak to I think the position the company is in today. Because if things were on the up and up, they probably could have just looked at this and laughed and not done anything at all.

Chris Hill: Well, and thinking about a company like Apple, which is incredibly vigilant about how their products are used in television, in movies. They're not going to license their image for films where it's like criminals are using iPhones. It's like, "No, we want to hero's using iPhones. We don't want criminals using iPhones." But I think you're absolutely right, just in terms of like, look, if this business we're crushing, this wouldn't really be a story.

Jason Moser: Yeah, probably the case.

Chris Hill: Let's wrap up with an email from Peter Stanley, not just one of the dozens of listeners, but also a member of our Rule Breaker service. Peter writes, "I have over 100 holdings and I love almost all of them. I am thinking about trimming some leads as Jason would say, as they are not all firing on all cylinders. But I may be over diversified. My promise I feel like I may have seller's remorse if I see some of these companies excel in the coming years, how have you all dealt with this conundrum, as it seems, a lot of Fools have around 25-30 individual stock holdings? Do you just accept that you made the best decision based on the information you had at the time once you sell, making room for the new desired stock? Do you always have stocks potentially on the chopping block?" There's a lot to unpack there. I will just speak to that last question first. Just the idea of you always have stocks potentially on the chopping block. I don't think of it in those terms. I'm just speaking for myself. I do think in terms of a concept we've talked about a number of times which is just leash.

How much leash am I giving a given business? My mindset is, if I don't have to sell, I'm not going to sell. But I do get where he's going with that last part. For me, it's not so much the chopping block, but it's more like, I've got the ones that I know. If I do need to sell, if I do need to raise capital for any number of reasons, whether it's the fund, additional purchases, or to put the money somewhere else in my life. It's the underperformance. It's the ones that are furthest away from firing on all cylinders that are going to go first.

Jason Moser: Yeah, I mean, it's selling, it's going to be different for everybody, and I definitely like that idea of watering the flowers and pulling the weeds. I feel like, to me, I think the reasonable expectation is that you will run into this. Like you're going to run into the situation at some point where you do witness seller's remorse. The only way to not hit that, the only way to not actually get to that point is to surprise never sell. If you don't sell, then you'll never have seller's remorse. But that is not entirely reasonable. I mean, we are investing obviously to make money and for many of us, as we get older, we will need to sell some in order to capitalize on our success. For me, I think when you go into it, except accepting the fact that you're going to sellers are more at some point or another. Then the next thing you try to do is to figure out how can I learn from it. I think that's what really conservative, very valuable point for investors as you say, well, I'm going to sell something. Well, you should track after you sell it, follow it, and see how the business continues to do, see how the stock continues to do. You can even go so far as to keep a little investing journal where you're writing down the reasons why you sold, the things that you might be looking for. 

For example, you sell a stock and then you record that in a journal and then you follow that along and you see that stock continues to perform very well write-down the reasons why it appears that stock is doing well and compare those reasons to why you sold it in the first place. Sometimes they're connected, sometimes or not. But I think that the investing journal can help you make some sense of why you might run into seller's remorse so if you do, and again, I think that unless you just never sell at some point or another, you will run the seller's remorse. I don't look at it necessarily as a bad thing. I look at it as a way to learn and grow as an investor, and it's going to be different for everybody. I think you're right. I default that just being lazy. Like I just try to be lazy and like not sell. I don't need the money right now, I'm investing money that I just don't need for the foreseeable future. For me, I default to just not selling. Now, have a portfolio today with somewhere in the neighbor, I think it's 33 individual companies. For me, that's a bit more than I thought I would probably own, and the main reason is because they keep on finding these cool businesses out there that I want to own. Anytime I feel like I hit one of those points, I think that's another business I want to add. I don't feel badly adding it. 

Maybe I'll get the 50 companies and I'll look at 15, and I'll say, "You know what, I could go to 60. Maybe could go to 70," and I don't think 100 is too many honestly. I know there's some criticisms out there that the more you own, the more you risk mimicking an index, you got to get pretty big to do that, frankly, and furthermore, I mean, listen, owning S&P Index has worked out really well for a lot of people, so it's not necessarily a bad thing. But yeah, I do go back to number one, I just tried to be lazy and not sell because I don't need to. But if you do, I absolutely think it makes perfect sense to keep a little journal, write-down why you invested in the first place, why you're selling it now, and then track it, follow it, and see if the company continues to fail or succeed and tie that back to the reasons why you bought it, you sold it. I think they can ultimately help you develop as an investor and maybe make you less likely to run into seller's remorse down the road.

Chris Hill: Jason Moser, great talking you. Thanks for being here.

Jason Moser: Thank you.

Chris Hill: As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. That's going to do it for this edition of Market Foolery. The show's mixed by Dan Boyd. I'm Chris Hill, thanks for listening. See you tomorrow.