RE:Riddle Me ThisSIMPLICIT1, you introduce a very salient point. Why this financing, and why now? As you mentioned, the latest financials didn't lead a shareholder to believe our balance sheet was in any sort of jeopardy. So, what's up with the capital requirement? Obviously, there's more to the story and we can only speculate about their reasoning.
Yes, there is more to the story again and absent that information the market has no choice but to consider it a surprise and unfortunately Mr. Market doesn't like those sorts of surprises. Moreover it can lead shareholders to think management may not be as confident as they appear to be in their regular communications.
As far as the Definitive agreement is concerned, my initial reaction was very similar to yours. The exclusivity, the lack of a Linamar financial commitment etc. but upon further consideration I have concluded that the exclusivity is rather narrow in scope since it is only for integrated "beam axle" equipment on certain classes of vehicle which doesn't include passenger vehicles if my research is correct.
We should share research then. Because mine indicates the class 3 through 6 market is anything but narrow in terms of units and dollar value through the exclusivity period to 2030. In fact its VERY VERY Large. At present there are over 12 companies targeting this very market with 4 in 1 e-axles.
As to Linamar, why are we all ga ga over this company? I realize they are a wonderful company with tentacles throughout a number of indusry sectors. However their current market share in the EV space is almost non existant. This is not a mutually exclusive agreement either as stated in the PR. They intend to continue selling their current product line.
They do go on to say in the press release that it doesn't include direct drive trains which still leaves open a large swath of the market. Essentially Exro is comitted to Linamar only for integrated beam axle configurations in certain classes of vehicles.
That is the equivalent of saying..... you can sell anything we don't want to sell anyway. And oh by the way.... in spite of the nonsense some post here, the global class 3 through 6 market is huge and likely the most lucrative in the EV space given the route characteristics and payloads. Do you really think Linamar is in this space because its small?
In any deal you have to give to get. So, a constructive conversation should be about that, IMHO.
Unfortunately, we will never know but my sense is that Linamar held a gun to EXRO's head and leveraged the notion that EXRO was not prepared to walk away from 2 years of activity and press releases. Take it or leave it. And EXRO took it
What I see initially is Linimar getting their exclusivity to enable them to invest (probably a very large sum of money) in tooling to produce the e-axle and EXRO receiving Linimar support getting in to series production and perhaps the conincidental financing is to finish filling the clean room with the equipment required to accomplish that feat and if that is the case many of those dollars could come back to EXRO in tax credits.
Linamar is in the tooling business. They would have to make an investment even if it was their own technology. So I am not buy that Quid Pro Quo analysis. It doesn't pass the logic test. And I didn't invest in a company for the value of its potential tax credits.
Also, the timing of the financing may have been perceived opportune by the executive team with some knowledge about there being a market for all the shares they knew would be churned in the wake of the announcement.
I really appreciate the notion that you are spitballing, but I reiterate that management really screwed up here. This double announcement knocked the stuffing out of whatever favourable market sentiment there was/is/could have been for the Linamar deal
I'm just spit balling here folks but both the Linimar deal and the financing is somewhat perplexing. If you have faith in our executive team you have to believe they have good reasons for their actions.
finest regards
the fourth
Backatcha!
Simpliciti1
I'm just spit balling here