XL Fleet via Business Wire
Muddy Waters Research has taken a new short position in vehicle fleet electrification company XLFleet, according to Carson Block, the firm's CIO and famed short-seller.
In December 2020, XLFleet went public via a merger with special purpose acquisition company Pivotal Investment Corporation II, jumping 68% by its second day of trading. Since then, the stock has fallen by about 60%.
And Block isn't convinced it can return to its lofty, post-IPO highs, saying it screams of "stock promotion and bullsh-t".
"This is a SPAC bubble, where all kinds of garbage is being foistered on the public markets and that XL - at least in our view - middle of the fairway SPAC garbage," he said in a rough cut version of a Zer0es.tv interview seen by Insider.
XLFleet did not immediately respond when asked for comment.
For anyone who follows Muddy Waters Research on Twitter, Block's contempt for SPACs won't have gone unnoticed. Most notable is his feud with multi-billionaire Chamath Palihapitiya, CEO of Social Capital and a serial SPAC sponsor.
Tweet Embed://twitter.com/mims/statuses/1357070230657269763?ref_src=twsrc%5Etfw
According to Matthew 4:1-11, Jesus was still not tempted after going w/o food and water for 40 days. The below suggests SPAC Jesus wasn't able to last even 40 minutes. https://t.co/tBKlauoU1c
Block says the company is misleading both investors on the performance of the business, and customers on its products efficacy.
'Us' and 'them'XLFleet is being sold on a "blue-sky" story, with exponential growth in sales estimates, Block said, justified by a $1.4 billion sales estimate in 2024 that he calls "a joke."
In talking to former employees, the hedge fund has found this estimate has been created using a order backlog worth $200 million, he said.
"That backlog is greatly misrepresented. I mean maybe even to the point where you call it an outright lie," he said, adding that "we can extrapolate that this $1.4 billion is just farcical."
"What we learned from talking with three former salespeople is that they keep track of leads in Salesforce. If they have an initial call, they're told by their sales managers, to put in an exaggerated probability of that closing, along with a really optimistic - to the point of being ludicrous - number of potential units," he said.
But, the data is also being used to mislead the board, Block said, noting a former salesperson told researchers sale probabilities were "ratcheted from, say, 25% up to 75% to present this rosier picture to the board."
This has created a "us versus them" climate between the company's management team and the SPACs directors or promoters, he said.
The "us" - XL management - is "basically being willing to say, or do, anything to do whatever it takes to mislead the board and the people who promoted the SPAC in the first place," he said.
Moreover, even with customers who piloted the product, the reorder rate appears to only be about 10%, a fact the company glosses over, he added.
Exaggerating the ProductXLFleet's products allow firms to take cars with purely internal combustion engines and transform them into hybrid engines.
It pitches its product as achieving up to 25% fuel savings, in the case of the first generation hybrid, Block said.
"We understand, from our research, that that's fantastical," he added, "in reality, the fuel savings in terms of gallons are more like 5-10%."
"At every level here, they have been exaggerating," Block said, adding "we think that just shows that this company has a real truth-telling problem, regardless of who it's facing."
Stock promotionLast week, XLFleet posted a press release about a "strategic partnership" to produce electric vehicle-charging infrastructure at UBS arena, just outside New York City.
But Block says this was just "stock promotion".
At the time, the value of the company's shares had fallen, along with other momentum stocks, to around, or below, $15 a share, he said. That figure is very important figure for insiders, because if they can keep the stock at, or above, $15 a share by mid-May, then the ban on management selling shares in the company - known as a "lockup" with SPACs - could end as soon as early July, rather than the anticipated late December, he said.
's lockup can end as soon as early July as opposed to waiting till late December, he noted.
"It doesn't surprise me that as the stock dove and got to $14-15 that we saw this 'sexy' press release," he said.
"We don't that this company has a future. We just think that this is a bubble stock that everyone is trying to cash out of as soon as everyone is able to get off lock," he said.
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