Tesla's lead in China's red-hot electric vehicle market is shrinking, says rival XPeng

Business

Yahoo Finance 08 July, 2021 - 12:01pm 20 views

Why is Tesla stock dropping?

The electric-car maker's stock was down likely for two primary reasons: a bearish day for the stock market overall and some comments from Tesla CEO Elon Musk over the weekend about how rolling out self-driving-like features for its vehicle fleet has been more difficult than expected. Image source: Getty Images. Motley FoolWhy Tesla Stock Fell on Tuesday

But in the same breath, the executive at the upstart China-based EV rival said his company and peers are fast closing the competitive gap with Tesla.

"I think the Chinese players are catching up very quickly," Gu said on Yahoo Finance Live. "Our product as well as some of the other products that are being introduced by the leading players are very good, and have comparable specs — as well as better features I think compared to Tesla."

That point is not lost in the sales data from the main China EV players.

XPeng said this week deliveries in June surged 617% year-over-year to 6,565. So far this year, deliveries have skyrocketed 459% to 30,738 fueled by demand for XPeng's P7 sedan and G3 SUV. 

June deliveries at Nio rose 116% from a year ago to 8,083. For the quarter ending June 30, Nio delivered 21,896 vehicles marking a growth rate from a year ago of 112%. 

As for Li Auto, its June deliveries rose 321% from a year earlier to 7,713. Second quarter deliveries improved 166% year-over-year to 17,575.

Tesla reportedly sold 33,155 cars in China in June, up 122% year-over-year. 

"In the last few months, our growth has outpaced the industry as well as Tesla in China. But I think it's a long race because ultimately this market will not be dominated by one or two companies. It will probably be a number of players occupying probably large market share positions of 10% and above. That will likely be the trend, and we hope to be one of those top players," Gu explained. 

XPeng — which JPMorgan analysts estimate could grab 8% of China's electric car market by 2025 —currently has two models in the Chinese electric car market. They have gained notoriety in an increasingly crowded market for their tech-forward infotainment systems and autonomous technology.

The company's third model dubbed the G3i is expected to see deliveries begin in September, taking aim at smaller sedans such as the Toyota Camry. 

Shares of China's EV makers have cooled off this year despite their strong sales. XPeng shares are down 7% year-to-date, while Nio has shed 5%. Li Auto's stock is down 11% on the year. 

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

Safety appears to be the main reason, even though Tesla cars are considered very safe. It shows that investors have some work to do understanding modern automotive safety—just like they had some work to do understanding electric vehicles when Tesla burst on the scene years ago. Tesla stock (ticker: TSLA) stock closed down 2.8%, at $659.58, on Tuesday.

Shares of Tesla (NASDAQ: TSLA) stock slipped 2% by 10 a.m. EDT on the Nasdaq Stock Exchange Thursday, on a good news, bad news kind of a day for the electric vehicle manufacturer. Let's start with the good news: As Barron's reports this morning, Tesla shipped 33,000 EVs from its factory in China in the month of June, the second most deliveries of all EV makers (BYD was No. 1), and its total production in the country was 92,000 cars -- 30% of all Teslas sold globally in the second quarter. Given that last year, China accounted for only 21% of the company's global sales, Tesla is growing in the world's biggest market for EV cars -- and that's good news for the company.

The Dow Jones Industrial Average dived 500 points Thursday, as the 10-year Treasury yield tumbled. Tesla stock reversed amid strong China sales.

SHANGHAI (Reuters) -The S&P Dow Jones Indices and FTSE Russell on late Wednesday decided to remove more Chinese companies from their indices after an updated U.S. executive order barred domestic investment in firms with alleged ties to China's military. The U.S. index publisher identified 25 Chinese companies that would be deleted from its index on Aug. 2, while FTSE Russell said it will remove an additional 20 firms on July 28. The decision is based on the feedback from index users and stakeholders, FTSE Russell said.

EV stocks have multiplied in Tesla’s wake and as electric cars look to go mainstream. Here are the top-rated electric vehicle makers.

June China EV sales showed continued gains for Tesla, which also unveiled a cheaper made-in-China Model Y. Tesla stock rallied off key levels.

Stellantis EV Day is hitting hard and fast this morning, with big news coming from individual brands. More specifically, STLA will offer 37-82 kWh and up to 300 miles of range. STLA Medium will have 87-104 kWh and up to 440 miles.

The rate on the 30-year fixed mortgage — the most common home loan — decreased to 2.90% this week, down from 2.98%.

Alphabet Inc.’s Google (GOOGL) was sued by dozens of U.S. states alleging the company misused its domination over the sale and distribution of apps through its Google Play Store, Bloomberg reported. Shares closed at $2,529.48 on July 7. (See Alphabet stock charts on TipRanks) The complaint filed on Wednesday stated that Google uses monopolistic strategies to prevent competition and ensure that app developers are forced to go through its Play store channel to reach its customers. The complaint al

(Bloomberg) -- XPeng Inc. ended flat in its Hong Kong trading debut after becoming the first Chinese electric-vehicle maker to finish a so-called homecoming share sale that raised $1.8 billion.The shares, which opened at HK$168, fluctuated throughout the session before ending at HK$165, the same as their offer price. The company went public in the U.S. last August, and its New York-listed shares have almost tripled from their IPO price.XPeng’s Hong Kong debut comes as China’s expanded crackdown

The excess in financial markets will have to unwind in a drastic manner, warns one veteran economist.

Read full article at Yahoo Finance

Why NIO, Li Auto, and Xpeng Stocks Are Down Today

The Motley Fool 08 July, 2021 - 03:46pm

Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

The U.S.-listed shares of several Chinese electric-vehicle makers were trading down on Wednesday after the Chinese government imposed restrictions on ride-hailing giant DiDi Global (NYSE:DIDI) following its initial public offering in New York.

Here's where things stood for these three companies' American depositary shares as of 1 p.m. EDT, relative to their closing prices on Tuesday.

China's government said earlier this week that it has launched cybersecurity reviews on DiDi and several other Chinese companies that have listed on U.S. markets in 2021, including Full Truck Alliance (NYSE:YMM) and Kanshun Limited (NASDAQ:BZ). The government's concern is apparently that the audits and oversight required of U.S.-listed companies could compromise the security of Chinese consumers' information. 

The near-term consequences aren't trivial: For the moment, DiDi isn't allowed to register new users -- a restriction that will sharply limit its growth potential until (and unless) the company works things out with regulators.

It's not yet clear what that means for Li Auto, NIO, and Xpeng, all of which listed in the U.S. before 2021. My thinking right now is that the companies themselves aren't likely to be hit with significant fines or penalties. But if they're no longer able to offer new shares in the United States, an important avenue of funding will be closed off.

NIO's plans to ramp up production could be slowed if the company's ability to raise money in the U.S. is restricted. Image source: NIO, Inc.

As any auto investor knows, auto manufacturing requires big capital commitments up front -- capital commitments that have to be sustained through economic cycles. While all three of these companies took advantage of last year's bull market to bolster their balance sheets and cash reserves via offerings to U.S. investors, they might not be able to do so again in the future.

That's one concern here, and if you own any of these three stocks, it's something to watch. 

We might have to wait until these companies report second-quarter earnings to get a clearer understanding of how China's enforcement actions might (or might not) affect their businesses. None of the three have yet announced dates for their earnings reports, but I expect all three sometime in mid-August. 

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Why Tesla's Stock Isn't Joining the Tech Rally

Barron's 08 July, 2021 - 03:46pm

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Tesla stock is down again Wednesday while the Nasdaq Composite, home to many richly valued tech stocks including Tesla, keeps going up. Tesla’s recent trading action might be disquieting both Tesla bulls and bears. Not all that much is going on, though. These are just the dog days of summer. Still, there is one issue to watch as electric vehicle makers start to report second quarter results.

Shares are off about 2% in midday trading Wednesday. The Nasdaq Composite is up slightly. Month to date, Tesla (ticker: TSLA) stock is down almost 5% while the Nasdaq has rallied 1.2%. What’s more, Tesla is still off about 28% from its $900.40 52-week high, set back in January. The Nasdaq hit a new high on Wednesday.

It’s tempting to look for a good fundamental reason for the divergence. There have been some recent articles about the safety of Tesla vehicles that might be impacting investor sentiment this week. Still, it doesn’t feel enough to justify the drop. And for every potential recent negative there is a recent positive.

Morgan Stanley analyst Adam Jonas, for instance, pointed out on July 1 that Tesla was stepping up management recruiting in the country. That’s a positive that bulls can hold on to. Tesla moving into India could mean a lower priced EV and expansion into another market.

Jonas is a Tesla bull rating shares Buy. His price target is $900 a share.

A better reason for Tesla’s recent trading pattern is that EV stocks, including Tesla, started to recover before the Nasdaq.

EV stocks–including shares of Tesla, startups such as Fisker (FSR) and Faraday Future, which is merging with SPAC Property Solutions Acquisition (PSAC), and Chinese EV maker NIO (NIO), among others–all hit their 52-week highs around January and February.

Then investors started to worry about growth because of a global semiconductor shortage that hampered auto production around the world. Most EV stocks are richly valued and investors expect rapid expansion of sales and profit margins. What’s more, interest rates rising also hurt EV stocks.

Rates started to rise around February. Higher rates hurt highly valued growth stocks more that others because it makes financing growth more expensive. What’s more, growth companies generate most of their cash flow years down the road. Higher rates reduce the value of that cash in today’s dollars.

But the semiconductor shortage faded, rates stabilized and Chinese EV sales continued to growth rapidly year over year. China is the largest new car market in the world and the largest market for new EVs.

EV stocks, as a result, have gained more than 20% on average while the Nasdaq and S&P 500 rose about 7% and the Dow Jones Industrial Average gained roughly 4%.

Tesla stock, however, is down about 3% over the past three months. Given how the other EV stocks have responded, Tesla’s missteps in China might be most responsible for weighing on investor sentiment. Tesla suffered some bad PR from how it handled a brake complaint, and the company issued a technical recall to fix an issue with its cruise control. It was a recall, but the issue was fixed with an over the air software update. The cars didn’t have to go into any service shop for a fix.

Looking ahead, China appears to hold the key for Tesla and most EV stocks for the second half of 2021. Of course, company specific factors can impact stocks. But more Chinese growth should equal more EV gains, regardless of what the overall market is doing.

Investors will be looking for updates about Chinese sales, production and demand when Tesla reports earnings later in July. Tesla delivered more than 200,000 vehicles in the second quarter, a record for the company. But Tesla doesn’t break down quarterly deliveries by region.

Guidance from NIO and its peers about third quarter deliveries will also be another key data point. NIO management to hit the high end of its second quarter delivery guidance, despite production problems caused by the chip shortage.

Tesla should report numbers around July 22. NIO should come in the first weeks of August. Neither company has confirmed its earnings reporting date.

Write to editors@barrons.com

Tesla stock is down again Wednesday while the Nasdaq Composite, home to many richly valued tech stocks including Tesla, keeps going up.

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Didi Global. Alphabet Fall Premarket; WD-40 Rises By Investing.com

Investing.com 08 July, 2021 - 03:46pm

Investing.com -- Stocks in focus in premarket trade on Thursday, July 8th. Please refresh for updates.

Didi Global (NYSE:DIDI) fell 5.7%, the ride-hailing company falling for the fourth day on continued worries over China's increased regulatory scrutiny on domestic technology companies. E-commerce giant Alibaba (NYSE:BABA) stock fell 2.6% and internet search engine Baidu (NASDAQ:BIDU) stock dropped 3.8%.

CSX (NASDAQ:CSX) stock fell 1.1%, Canadian Pacific (NYSE:CP) stock fell 1.9%, Norfolk Southern (NYSE:NSC) stock fell 2% after the Wall Street Journal reported that the Biden administration is looking to confront consolidation and perceived anti competitive pricing in the railroad industries. Canadian National Railway (NYSE:CNI) stock rose 0.5%, with the company in a takeover battle for Kansas City Southern (NYSE:KSU).

Carnival (NYSE:CUK) stock fell 5.1%, Royal Caribbean (NYSE:RCL) stock fell 2.8% and Norwegian Cruise Line (NYSE:NCLH) stock dropped 3.7% on fears the spread of the delta variant of the Covid-19 virus will delay the full reopening of the industry.

United Airlines (NASDAQ:UAL) stock fell 3.1%, American Airlines (NASDAQ:AAL) stock dropped 3% and Delta Air Lines (NYSE:DAL) stock fell 2.2% on fears the surge of Covid-19 cases globally will hit the travel industry.

Alphabet (NASDAQ:GOOGL) stock fell 1.7% after a number of states took the owner of Google to court alleging it operates an illegal monopoly with its Google Play app store.

WD-40 Company (NASDAQ:WDFC) stock rose 5.2% after the chemicals company raised its full-year revenue forecast, citing a strong third quarter.

Gan Ltd (NASDAQ:GAN) stock rose 11% after the online gaming company announced strong preliminary second-quarter results, lifting its revenue guidance for the year.

DR Horton (NYSE:DHI) stock fell 2.1% after RBC downgraded its stance on the home builder to ‘sector perform’ from ‘outperform’, saying this market is due for a slowdown.

Charles Schwab (NYSE:SCHW) stock fell 3.7% after Goldman Sachs (NYSE:GS) downgraded the financial services company to ‘neutral’ from ‘buy’, saying upside is limited after the recent retail trading boom. 

Coinbase Global (NASDAQ:COIN) stock fell 5.4%, with the cryptocurrency exchange weighed by the 6% slump in the price of bitcoin, the largest by market capitalization of the digital currencies.

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Tesla: New, Powerful Rally Ahead?

Investing.com 08 July, 2021 - 03:46pm

When compared to the broader market, Tesla (NASDAQ:TSLA) has been an underperformer for much of this year. Investors soured on the world’s largest electric vehicle maker amid growing competitive threats from traditional automakers, signs of a potential sales slowdown in China, and an ongoing semiconductor shortage.

But during the past one month, there are indications that the bearish spell in Tesla stock has run its course and investors are taking advantage of its current weakness. Shares of the Palo Alto, California-based EV producer have gained more than 13% over the one month period, almost wiping out the stock's year-to-date losses. TSLA closed on Friday at $678.90, down about 4% for the year.

For Tesla bulls, perhaps the best thing about the current rebound is that the stock's momentum is backed by a number of positive catalysts. The company told investors on Friday that it delivered 201,250 cars worldwide in the second quarter, a record number despite chip shortages and concerns about the fall-off in its China market. 

The bulk of sales during the period were for the Model 3 sedan and the Model Y crossover, which are produced in Shanghai and Fremont, California. Those countries are Tesla’s biggest markets. This strong delivery performance is an indication that CEO Elon Musk is likely to report another strong quarter when the company releases its second-quarter financial results later this month.

In a note to clients, Wedbush Securities analyst Daniel Ives said:

“This quarter was an impressive performance from Musk & Co. and now with a strong second-half performance should be able to hit ~900k vehicles for the year, which was a major stretch goal.”

Along with Tesla continuing to produce additional vehicles each quarter, the improved sentiment overall for growth stocks is also helping. 

Mega-cap tech names like Facebook (NASDAQ:FB), Alphabet (NASDAQ:GOOGL) and Microsoft  (NASDAQ:MSFT) are back near records as inflation fears ease and prospects for technology stocks improve as the re-opening of the U.S. economy gains steam.

Despite these positive signs, analysts on Wall Street remain split about the stock’s performance this year after its more than 700% rally in 2020. Of 24 analysts covering the stocks, 10 recommend a buy, 7 favor a sell and an equal number are calling for a hold. The average price target represents a 10.39% decline from the last price of $678.90, according to TipRanks.

UBS analysts in a recent note explained that the growing competition in the EV market is one key impetus for why some of the shine has faded from Tesla shares this year. 

“Our key concern shorter-term is that Tesla’s demand momentum in China is slowing, and our checks on the ground suggest that [battery electric vehicles] from domestic brands are gaining further ground vs. Tesla, which may trigger additional pricing action by Tesla and consequently lower gross margins,” UBS’s Patrick Hummel said in a recent note.

Hummel, while maintaining a neutral rating on the stock and reducing his price target on Tesla to $660 per share from $730 per share, said pressure from other EV makers will continue to weigh on the company. His note adds:

“Valuation-wise, the EV launches from competitors with high range, charging performance and attractive value-for-money, could continue to weigh on the value the market is willing to assign to Tesla’s long-term growth.”

The short-term outlook for Tesla has brightened after the company produced more cars in Q2 than analysts were expecting. That shows it’s been succeeding in overcoming supply-chain issues which are hurting other traditional automakers.

This impressive performance, however, may not be enough to push the stock much higher from current levels amid concerns about the growing competition.

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Chinese stocks continue to fall amid Didi probe in China

Yahoo Finance 08 July, 2021 - 03:46pm

MYLES UDLAND: Let's talk a little bit more about one of the stories that's underneath the surface of the index sell-off and has really been a leading indicator here. And that's what's happening with China-based US-listed companies. Of course, Didi at the center of this. Company came public one week ago today in an IPO where it raised about $4 billion. Shares this morning of Didi are off about 5% and the stock now trading under $12 per share, so down more than 30% from where the company was priced when it went public.

And they are not the only China-based company that trades in the US that's seen their stock under pressure. Shares of Baidu, JD.com, Alibaba, they're all under pressure this morning, down more than 2%. And Julie, it continues-- or we continue to see new developments in the regulatory future for these businesses. I know Jared caught our attention with just sort of his personal view that maybe these companies won't be listed on the market in some years time. But the way that these businesses are regulated, both by US and Chinese regulators, seems almost certain to be changing in the coming months and years.

JULIE HYMAN: Right, on the US side, there has been the suggestion over the past few years that Chinese firms that list in the US be held to US auditing standards. That's something that bipartisan members of Congress have pushed for. On the Chinese side, we're not exactly sure what is going to happen. We know Chinese regulators, of course, have pulled the Didi app off of Chinese app stores and platforms, right? And we know that there is some dissatisfaction on the part of the Chinese authorities.

The official line is that we cannot have-- there cannot be a large foreign ownership of Chinese-based entities. But Chinese companies have gotten around that through various other types of legal entities over the past several years, Didi and many of the other-- basically all of the other US-listed companies that are based in China included. So are Chinese regulators going to change that for existing listings, ones that are already public? Are they going to change it for new ones? We don't exactly know. But we know there's dissatisfaction.

So that brings us to Didi, which, of course, just listed in the US on July-- on June 30. The shares have fallen. And there are a lot of questions about what Didi's management knew about the Chinese dissatisfaction, how it was going to affect the company. One of the people asking those questions is now not a Chinese regulator but a US regulator-- or a US Congressman, I should say-- Chris Van Hollen, a senator from Maryland. And we've had Republicans like Marco Rubio asking these questions as well. Van Hollen saying in a statement to CNN that the SEC should be looking into the situation with Didi in particular.

So there are just a lot of questions for investors about what is going to happen next on both sides. And that cloud is certainly affecting that company, as well as other Chinese companies. We had what looks like the first Chinese IPO pulled, or delayed at least, because of all of this. It's a company called LinkDoc Technology, which is a medical tech company. So definitely a lot of questions. And as we know the old saw goes, the market doesn't like uncertainty.

BRIAN SOZZI: Right, Julie, and you put it really perfectly there with a dark cloud. It's not just hanging over Didi. To your point, it's hanging over the entire space. And I'm looking at the Invesco Golden Dragon China ETF on the Yahoo Finance platform. Some of that ETF's top holdings include Nio, JD.com, Alibaba, Baidu, Netties, Xpeng, who we'll talk to a little bit later on this show. That ETF is down about 15% over the past three months.

So Myles and Julie, we're not seeing institutional investors come in here and try to pick the bottom here. And actually, in fact, that ETF-- you see it there on the screen-- is-- looks like it's going to break through-- could break through below today the mid-- or actually late-- May low that it did see, which is, obviously, not a good sign to see. But we're just not seeing anyone trying to pick a bottom in these stocks until likely sentiment improves. And we're not seeing that yet.

MYLES UDLAND: Yeah, it's-- you know, I think when you see these moments where you have a broad market sell-off underneath the surface, again, there's always individual points of pain. And we're going to talk about the meme trade, which is under pressure as well, in the next segment. But it's been-- you know, I don't really think this is a canary in the coal mine or whatever. People love to use that. Oh, this led first, and now we've seen the market follow. I'm not sure that Didi facing regulatory pressure was necessarily a big trigger for a market that was already being held up by a few big cap tech names.

But in these moments of pressure, you kind of look around and you say, well, that certainly didn't help. And I think we-- I kind of have the feeling around that story for this market, or at least, what today's market appears to be giving us. But, you know, as you mentioned, stocks at a record high yesterday. So, you know, let's slow the roll maybe on markets in turmoil just a little bit.

Investor sell off continues after China’s crackdown on company.

(Reuters) -Didi Global Inc fell for the third consecutive session on Wednesday after China ordered the app removed from mobile app stores as part of a broader crackdown on China-based companies with overseas listings. Beijing extended its actions beyond the tech sector on Tuesday, vowing to step up scrutiny of Chinese companies listed offshore in order to crack down on illegal activity. On Wednesday, China fined internet companies including Didi, Tencent Holdings Ltd and Alibaba Group Holding Ltd for failing to get approval for earlier merger and acquisition deals.

China's leadership is deeply suspicious of the international financial system, and wants to ensure that the Chinese Communist Party remains the absolute power in the land, unthreatened by fast-growing corporate giants.What's new: That lesson was learned the hard way this week by Didi, but the repercussions are likely to be much larger. Already, Chinese fitness app Keep has decided to scrap its planned $500 million IPO in New York.Get market news worthy of your time with Axios Markets. Subscribe

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Yahoo Finance 08 July, 2021 - 03:46pm

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AMC Entertainment Shareholders Are Making a Huge Mistake | The Motley Fool

Motley Fool 07 July, 2021 - 08:02am

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The most surprising stock of 2021 is probably AMC Entertainment Holdings (NYSE:AMC), the world's largest movie theater chain. Any objective observer would view the company as being in very dire straits; after all, AMC is saddled with billions in debt, reeling from the global pandemic, and facing a highly uncertain recovery amid the streaming revolution and compressed theatrical windows. Of course, this being the year of the meme stock and Reddit-fueled speculation, the stock is up a massive 2,350% this year.

Retail investors apparently see the stock as a reopening play and a short squeeze candidate, while also also betting their online community will keep buying and holding the stock.

That's a dubious proposition, however, as it's really, really difficult to see how AMC's intrinsic value is now worth anything close to its current share price.

Of course, given its inflated share price, AMC does have a chance to raise money to help it through this transition period and potentially transform the company. But its shareholders are preventing management from doing what it needs to do, hurting their own cause in the process.

On July 6, AMC filed a document with the SEC saying it would not seek shareholder approval to sell another 25 million shares at the upcoming July 29 annual shareholder meeting. CEO Adam Aron, who has taken great pains to cultivate an online relationship with his retail shareholder base, took to Twitter to say that due to the significant opposition from many shareholders to further dilution, the company would be scrapping that proposal:

Kudos to Aron for being responsive to his retail shareholders, who have already helped out the company tremendously by bidding up the stock and allowing the company to raise about $1.25 billion last quarter. Obviously, he needs to keep the retail message boards happy and AMC's stock high for as long as possible.

However, shareholders really should have approved another 25 million shares, which would have raised a significant amount -- basically another $1.25 billion at these prices, with minimal further dilution. It's a massive unforced error. 

I don't think retail investors quite understand the predicament in which AMC still finds itself -- even after all the money it's raised. Although the domestic June box office has bounced back to top $1 billion for the first time since February 2020, it's still well short of pre-pandemic levels. Only around 80% of theaters are open, and the delta variant is still wreaking havoc in Europe, where AMC also owns a significant amount of theaters.

Movie theaters are a high fixed-cost business, so unless theaters are open and close to full capacity, the company will still likely be burning cash in the second quarter. Given how much it's raised and how much the company had at the end of the first quarter, AMC's cash levels are likely a little under $2 billion.

You might think that's a lot, but a look further down the balance sheet shows other hazards lurking. AMC still has over $5.4 billion in debt and another $4.9 billion in lease liabilities. Furthermore, at the end of the first quarter, its current liabilities outstripped its current assets by another $500 million, likely due to some deferred rent it will now have to pay. Those current assets have since been boosted by the equity sales, but that's a lot of liabilities on the balance sheet for a company that is still likely unprofitable.

Furthermore, one of the only ways today's stock price has a chance of making sense is if AMC can purchase other bankrupt theater chains on the cheap. But that will take a lot of capital, too. According to Deadline, AMC may be absorbing the leases of two high-traffic California cinemas, The Grove in Los Angeles and the Americana mall in Glendale, from the previous owner.

Having been to The Grove shopping center, I can attest this is a very high-traffic theater. It would be great if AMC could scoop up more leases of well-placed theaters whose owners are now bankrupt without stretching its balance sheet any further. But since shareholders have blocked more equity sales, AMC may have to leave other similar opportunities on the table. 

While AMC's share count has roughly quintupled since before the pandemic, remarkably, shares are trading close to all-time highs -- in fact, much higher than before the pandemic, when the company was operating at full strength. So at roughly $50 per share and more than a $25 billion market cap, AMC should be raising all the money it can at these prices to make sure it can get through the pandemic and take advantage of any opportunities that may come up. After all, the company was only asking for another 25 million shares, which would amount to just under 5% dilution at today's share count. That's really peanuts relative to the dilution that's already occurred.

But of course, some meme-stock holders may not be doing any math, or thinking about intrinsic value. Most of the commentary you read on Reddit is about solidarity in "holding the line" and "sticking it to the shorts." That kind of coordinated buying can work for a while, but as Warren Buffett's teacher Benjamin Graham once said, "in the short run, the stock market is a voting machine, in the long run, it's a weighing machine."

We don't know how long this coordinated "voting" will go on, but it won't be forever. When the bubble bursts, I think shareholders will wish AMC had another $1.25 billion in cash on hand. It's a big unforced error on shareholders' part.

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