A thorn in the side of longs continues to be Hindenburg Research. Whenever a hot stock starts climbing, Hindenburg goes short and then they come out with their usual hit piece – XYZ stock is a fraud, going to zero, and here’s our report. XYZ stock drops. Hindenburg covers. Rinse and repeat. Hindenburg has recently done this with Sorrento Therapeutics, Genius Brands, and now with IDEX Stock.
As you can see from the chart above, Hindenburg was able to drop the stock from $4 to almost $1 as nervous longs dumped their positions. While it’s terrible many sold at a loss, for those that know IDEX stock it was a discount entry opportunity. There’s so much in the pipeline it’s crazy. The Treeletrik spinoff, the bus deliveries, more orders, more ventures; including a possible US venture. Shorts are playing with fire as per the existing news already released, IDEX stock should be back at the highs. Taking a closer look, the shorts have overplayed their hand and are about to get squeezed.
About IDEX Stock
First up, here’s a little background info for those that aren’t familiar with IDEX stock. Ideanomics is a global company focused on facilitating the adoption of commercial electric vehicles and developing next-generation financial services and Fintech products. Its electric vehicle division, Mobile Energy Global (MEG) provides group purchasing discounts on commercial electric vehicles, EV batteries, and electricity as well as financing and charging solutions.
Ideanomics Capital includes DBOT ATS and Intelligenta which provide innovative financial services solutions powered by AI and blockchain. MEG and Ideanomics Capital provides global customers and partners with better efficiencies and technologies and greater access to global markets. The company is headquartered in New York, NY, and has offices in Beijing and Qingdao, China.
Hindenburg’s Report On IDEX Stock
We hate to even give their report any credibility by repeating what they said, but it’s important to put it into context. The short seller accused Ideanomics of doctoring vehicle photos in press releases to suggest that it owned or operated the facility. Hindenburg said its investigator called five purported IDEX electric vehicle customers and none were aware of the company.
These are pretty weak claims in our opinion. While IDEX stock is a Chinese company, its CEO is an American. We don’t think he would risk prison by putting out fake press releases. Furthermore, you can fake VIN numbers and all vehicles sold were reported with their actual VIN numbers.
Hindenburg Research alleged that Ideanomics claims to own and operate a large-scale facility in Qingdao for its MEG division sales and that their investigators have been on-site and claim MEG does not have a presence there. Ideanomics never claimed or disclosed ownership of the site. It holds a 15-year rent-free agreement which was signed by Ideanomics in Nov. 2019 and has since provided images to show its participation at the site. Hindenburg Research disseminated social media content regarding their conversation with MEG partner’s sales staff with auto dealers at this site. Ideanomics obtained statements from these staff members that refute Hindenburg’s claims.
Reasons To Be Bullish On IDEX Stock
First up, one needs to look at the longer-term picture. Within the past five years, Ideanomics stock was as high as $7, so shares have a long way to go before making new highs.
Second, it’s important to look if there’s a high short position. Ideanomics stock has a lot of bears betting against the company with 8% of the float short. At current levels, the shorts have bet $25 million that the stock is going lower. If the momentum continues, the shorts will be forced to scramble further fueling the upside.
Third, is Ideanomics stock in a hot sector with high gross margins? Check and check. EVs in China is perhaps the hottest sector on the planet right now as China rushes to switch from fossil fuels to electric vehicles. Ideanomics sports a gross margin of 91%. In comparison, Tesla has only an 18% gross margin.
Fourth, is the company making sales? It seems like every day or every other day Ideanomics announces a new order. In just the past two days alone, Ideanomics announced almost $10 million in new orders. Last year, the company did $18 million in sales.
While Q1 was impacted by COVID-19, sales have already picked up as China has recovered from COVID-19 faster than other countries. Mobile Energy Global’s (MEG) expo center in Qingdao, sold 2,139 vehicles for a total value of RMB 235 Million or USD 33 Million since it began operations on May 1. Based on the level of sales activity in the first week of June, June sales are expected to exceed May levels. In China, the high season for car buying is from October to January. In its first five weeks of being operational, the dealers at the MEG Center have received high levels of interest, and management is optimistic that it can achieve its previously stated RMB 1 Billion sales target in 2020.
Investors need to ignore the noise from Hindenburg with their “short and distort” campaign. It should be illegal, but it’s not. It’s their first amendment right to free speech that protects them. The best approach is to take the long view, like with Inovio Pharmaceuticals. Smart investors were able to pick up stock back in March at $5 before the run to $30. All we can say is, ignore the shorts and focus on the long run with IDEX stock.
As always, good luck to all (except the shorts)!
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Disclosure: We have no position in NASDAQ:IDEX or any of the securities mentioned. We wrote this article ourselves and it expresses our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article.