(Bloomberg) — There is nothing about the finances of Blink Charging Co. that would suggest it’s one of the hottest stocks in America.
It’s never posted an annual profit in its 11-year history; it warned last year it could go bankrupt; it’s losing market share, pulls in anemic revenue and has churned through management in recent years.
And yet a hot stock it is. Investors have bid Blink’s share price up 3,000% over the past eight months. Only seven stocks — out of about 2,700 that are worth at least $1 billion — have risen more over that time. The reason: Blink is a green-energy company, an owner and operator of charging stations that power up electric vehicles. And if investors are certain of one thing in the mania that is sweeping through financial markets, it is that green companies are can’t-miss, must-own investments of the future.
No stock better captures this euphoria than Blink. With a market cap today of $2.3 billion, its enterprise value-to-sales ratio — a common metric to gauge whether a stock is overvalued — has blown out to 493. For some context, at Tesla Inc. — the darling of the EV world and a company with a very rich valuation itself — that number is just 25.
“Everything about it is wrong,” said Andrew Left, the founder of Citron Research. “It is just a cute name which caught the eye of retail investors.”
Citron was one of a handful of firms that bet against Blink last year, putting on short-sale trades that would pay off if the share price fell. It’s one of several wagers against stocks favored by the retail-investment crowd that have gone against Citron — with GameStop Corp. being the most high-profile — and prompted Left to declare Jan. 29 that the firm was abandoning its research into short-selling targets. Overall short interest on Blink — a gauge of the amount of wagers against the stock — has fallen to under 25% of free-floating shares from more than 40% in late December.
For the short-sellers, one of the things that raised alarms is that several figures tied to Blink, including CEO and Chairman Michael Farkas, were linked to companies that ran afoul of securities regulations years ago.
Farkas dismisses this and the other criticisms lobbied by the shorts. “There have been and always will be naysayers,” Farkas said in an email. “When I founded the business, the naysayers questioned whether the shift to EV was real. Now, as the value of our business grows, the naysayers tend to be the short sellers.”
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In the Crosshairs
Making money on charging is, historically, a losing proposition. In theory, a model like Blink’s that involves both equipment sales and collecting user fees could become consistently profitable as government support accelerates EV adoption. But no one’s done it yet.
“This market is still too small and early-stage,” said Pavel Molchanov, an analyst at Raymond James & Associates. “It will take time for economies of scale to materialize.”
Even by the industry’s fairly forgiving standards, Blink’s revenue is meager, totaling an estimated $5.5 million in 2020. ChargePoint Inc., which announced plans to go public via a special purpose acquisition company last year, generated $144.5 million in revenue in 2020, according to a January filing. EVgo Services LLC, which is nearing a similar deal to go public through a SPAC, has a smaller charging network than Blink but more than double the sales — an estimated $14 million in 2020. Despite the wildly different revenue figures, all three companies have an enterprise value of between $2.1 billion and $2.4 billion.
Blink warned in a May filing that its finances “raise substantial doubt about the Company’s ability to continue as a going concern within a year,” a required disclosure when a company doesn’t have enough cash on hand for 18 months of expenses.
“Electric is real. The stock prices of companies in the space are not,” said Erik Gordon, an assistant professor at University of Michigan’s Ross School of Business. “The dot-com boom produced some real companies, but most of the overpriced dot-com companies were lousy investments. The electric boom will be the same story. Some great companies will be built, but most of the investors who chase insanely-priced companies will be crying.”
Still, the recent market boom has breathed new life into Blink, allowing it to raise $232.1 million though a share offering in January. Roth Capital Partners as recently as Friday recommended buying the stock, giving it a price target of $67, 26% above the current level.
Shares rose 6.3% to $56.71 at 10:53 a.m. in New York on Monday.
The company’s prospects rely on exponential EV growth, and Farkas in January discussed plans to deploy roughly 250,000 chargers “over the next several years” and often touts the company’s ability to generate recurring revenue from its network.
Currently, the company says it has 6,944 charging stations in its network. An internal map of Blink’s public fleet lists about 3,700 stations available in the U.S. By contrast, ChargePoint boasts a global public and private charging network that’s more than 15 times larger.
Unlike some of its competitors, Blink’s revenue model hinges in part on driving up utilization rates, which for now remain in the “low-single-digits,” too scant to generate significant revenue, Farkas said during a November earnings call. He told Bloomberg that use will increase as EVs become more popular.
For most chargers in operation now, utilization probably must reach 10%-15% to break even, although profitability depends on many other factors such as a company’s business model, electricity rates and capital costs, according to BloombergNEF Senior Associate Ryan Fisher.
Blink was an early market leader among charging companies but has lost its lead and now controls about 4% of the sector in Level 2 public charging, said Nick Nigro, founder of Atlas Public Policy, an electric car consulting and policy firm.
Blink has also acknowledged “material weaknesses” over its financial reporting, disclosed in U.S. Securities and Exchange Commission filings dating back to 2011. The company says it has hired an accounting consultant to review its controls and is making necessary changes.
Blink’s colorful origin story has been a prime target of short-sellers. It traces back to 2006 when it formed as shell company New Image Concepts Inc. to provide “top-drawer” personal consulting services related to grooming, wardrobe and entertainment, according to an SEC filing.
In December 2009, the company entered a share exchange agreement with Car Charging Inc. Farkas joined the company as CEO in 2010, after working as a stockbroker and investing in companies including Skyway Communications Holding Corp., which the SEC deemed a “pump-and-dump scheme” during the years Farkas held shares. (Farkas said he was a passive investor, was unaware of any misdeeds and “had no involvement in any capacity in the activities of Skyway.”)
In 2013, Farkas oversaw Car Charging’s $3.3 million purchase of bankrupt Ecotality, which had received more than $100 million in U.S. Department of Energy grants to install chargers nationwide. The company later changed its name to Blink.
Since then, Blink has been plagued by executive turnover, with three of five board members departing between November 2018 and November 2019. The company has had two chief financial officers and three chief operating officers since 2017. One 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, which denied any wrongdoing, for $400,000 in October.
Financier Justin Keener, a one-time major Blink shareholder whose capital assisted the company’s 2018 Nasdaq listing, and the company he operated were charged last year for failing to register as a securities dealer while allegedly selling billions of penny-stock shares unrelated to Blink. He said he has since divested from Blink and now owns “a relatively small number of common shares” as a result of a settlement of a warrant dispute with the company. Keener denies the SEC allegations.
Farkas told Bloomberg he has cut all ties to Keener, was unaware of any investigations going on while they worked together and has no knowledge of any wrongdoing by Keener.
The surging stock has brought a windfall to Farkas, Blink’s largest shareholder. On Jan. 12, after shares rallied to records, he sold $22 million of stock, according to Bloomberg data. Farkas’s total compensation, including stock awards, totaled $6.5 million from 2016 to 2019, equivalent to more than half the company’s revenue. Included in his 2018 compensation were $394,466 in commissions to Farkas Group Inc., a third-party entity he controlled that Blink hired to install chargers.
Farkas said his compensation is justified given that he had personally invested in the company’s formation and had for many years received shares in lieu of salary.
More recently, Blink board member Donald Engel followed the CEO’s lead.
He sold more than $18 million of shares during the past two weeks.
(Updates market cap in fourth paragraph and share price in 15th paragraph.)
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