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EV company with almost no sales makes 3,000% profit in 8 months

(Bloomberg) – There is nothing about Blink Charging Co.’s finances to suggest that it is one of the hottest stocks in America. It has never made an annual profit in its eleven-year history. it warned last year that it could go bankrupt; It is losing market share, gathering anemic revenue, and has been transformed through management in recent years. And yet it’s a hot stock. Investors have increased Blink’s stock price 3,000% over the past eight months. Only seven stocks – out of about 2,700 worth at least $ 1 billion – have risen faster during this time. The reason: Blink is a green energy company, owner and operator of charging stations that power electric vehicles. And if investors are certain of one thing in the mania that grips the financial markets, it is that green companies are indispensable and must own investments of the future. No stock captures this euphoria better than Blink. With a market cap of $ 2.17 billion as of Monday, the ratio of company value to revenue – a common measure of determining whether a stock is overvalued – has dropped to 481. In some cases, Tesla Inc. – the darling of the EV world and a very rich valuation company itself – has that number only 26. “Everything about that is wrong,” said Andrew Left, founder of Citron Research. “It’s just a cute name that has caught the attention of retail investors.” Citron was one of the few companies that bet against Blink last year and made short sales that would pay off if the stock price fell. It’s one of several bets against stocks favored by the mass of retail investors who have taken action against Citron – with GameStop Corp. best known – and led the left to declare on Jan. 29 that the company is about to give up its research – sales targets. Overall short interest in Blink – a measure of the number of bets against the stock – has fallen from more than 40% in late December to below 25% of free-floating stocks. For the short sellers, one of the things that raised the alarm was that several Blink-related figures, including CEO and Chairman Michael Farkas, had been linked to companies that broke securities regulations years ago. Farkas dismisses this and the other criticisms voiced by the shorts. “There have been and always will be naysayers,” Farkas said in an email. “When I started the company, the naysayers asked if the move to electric vehicles was real. Now that the value of our business is growing, the naysayers tend to be short sellers. See also: Bloomberg Intelligence’s Environmental, Social and Corporate Governance Dashboard In the crosshairs, earning money on fees has historically been a loss. In theory, a model like Blink’s, which includes both device sales and user fee collection, could become consistently profitable as government support accelerates the adoption of electric vehicles. But nobody has done it yet. “This market is still too small and at an early stage,” said Pavel Molchanov, analyst at Raymond James & Associates. “It will take time for economies of scale to kick in.” Even by the relatively malleable industry standards, Blink’s sales are meager, estimated at $ 5.5 million in 2020. ChargePoint Inc. announced plans to go public through a special acquisition company last year, it generated revenues of $ 144.5 million in 2020, according to a report filed in January. EVgo Services LLC, which is about to go public via a SPAC, has a smaller charging system than Blink, but more than double its revenue – an estimated $ 14 million in 2020. Despite the vastly different sales figures, all three companies have Ein Company value between $ 2.1 billion and $ 2.4 billion. Link warned in a May announcement that its finances “raise significant doubts about the company’s ability to proceed within a year,” a disclosure required if a company does not have enough cash for 18 months of spending. “Electric is real. The stock prices of companies in this area are not, ”said Erik Gordon, assistant professor at the University of Michigan’s Ross School of Business. “The dotcom boom produced some real businesses, but most of the overpriced dotcoms were lousy investments. The electric boom will be the same story. Some great companies will be built, but most investors pursuing insanely expensive companies will cry. “Still, the recent market boom breathed new life into Blink, raising $ 232.1 million through a stock offering in January. Roth Capital Partners only recommended buying the stock on Friday, giving it a price target of $ 67, 29% above current levels. Shares fell 2.3% to $ 52.10 on Monday in New York. The company’s outlook is based on exponential EV growth, and Farkas in January discussed plans to deploy approximately 250,000 chargers “in the next few years,” and often touted the company’s ability to generate recurring revenue from its network. The company currently claims to have 6,944 charging points on its network. An internal map of Blink’s public fleet lists approximately 3,700 stations available in the United States. In contrast, ChargePoint has a global public and private charging system that is more than 15 times larger. Unlike some of its competitors, Blink’s revenue model depends in part on increasing occupancy rates. Interest rates, which remain in the “low single digits” for the time being, are too low to generate significant revenue, Farkas said during a November earnings call. He told Bloomberg that use will increase as electric vehicles become more popular. For most chargers currently in use, usage will likely need to reach 10-15% to break even, although profitability depends on many other factors such as a company’s business model, electricity tariffs, and electricity usage, according to Ryan Fisher, Senior Associate at BloombergNEF, was an early leader among charging companies in the cost of capital but has lost its lead and now controls approximately 4% of the tier 2 public fees sector, said Nick Nigro, founder of Atlas Public Policy. Electric car consultancy, Link, has also identified “material vulnerabilities” in its financial reporting, which were disclosed in 2011 filings with the US Securities and Exchange Commission. The company says it hired an accounting consultant to review its controls and is leading it through any necessary changes. Origin StoryBlink’s colorful genesis was a primary target of short sellers. It dates back to 2006 when it was founded as a shell company, New Image Concepts Inc., to provide personal care, wardrobe, and entertainment counseling services, according to an SEC filing. 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 stockbroker and in companies such as Skyway Communications Holding Corp. which the SEC viewed as a “pump-and-dump system” during the years Farkas held shares. (Farkas said he was a passive investor, unaware of any wrongdoing, and was “in no way involved in Skyway’s operations.”) In 2013, Farkas oversaw Car’s $ 3.3 million purchase of bankrupt Ecotality Charging, which had received more than $ 100 million, US Department of Energy grants grants to install chargers nationwide. The company was later renamed Blink. Since then, Blink has been plagued by executive turnover. Three out of five board members will leave between November 2018 and November 2019. As of 2017, the company has two chief financial officers and three chief operating officers. A former COO, James Christodoulou, was fired in March 2020. He sued the company, accusing it of potential securities violations, and reached a settlement with Blink in October that denied any wrongdoing for $ 400,000. Financier Justin Keener, a one-time major shareholder in Blink, whose capital backed the company’s Nasdaq listing in 2018, and the company he operates were accused last year of failing to register as a securities dealer while allegedly selling billions of pennies -Sold stock stocks unrelated to Blink. He said he has since parted ways with Blink and now owns “a relatively small number of common shares” following the settlement of a warrant dispute with the company. Keener denies the SEC allegations. Farkas told Bloomberg that he had severed all ties with Keener, was unaware of any ongoing investigations during the collaboration, and was unaware of any wrongdoing by Keener. Farkas, Blink’s largest, was a stroke of luck with the increasing number of shareholders. On Jan. 12, he sold $ 22 million worth of shares, according to Bloomberg, after stocks rose to record levels. Farkas’ total compensation, including stock awards, was $ 6.5 million from 2016 to 2019, which is more than half of the company’s revenue. His compensation for 2018 included commissions of $ 394,466 to Farkas Group Inc., a third-party company he controlled that used Blink to install chargers. Farkas said his compensation was justified because he personally invested in starting the company and had done so for many years and received shares in lieu of salary. Recently, Blink’s board member Donald Engel followed the CEO’s lead. In the past two weeks, he has sold more than $ 18 million worth of shares. (Updates the stock price in the 15th paragraph and the market value in the fourth.) For more information articles like this, please visit us at bloomberg.com. Sign up now to stay up to date with the most trusted business news source. © 2021 Bloomberg LP

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