Comment I e-mailed to my KNDI friends this morning...
Though totally unrelated except maybe slightly positive due to a big jump in oil prices for KNDI, Friday's sharp Market decline due to events in Egypt seemed to negatively affect all stocks. Algorithmic Computer Programs were hitting bids all day long while volume in KNDI slowed to its lowest in Months. An event that shows that sellers are getting tired, a rebound getting closer.
Over the weekend, I was asked this question in the Comments section of my first Seeking Alpha post from back in September:
"Now that it is no longer true that its founder is the "sole source" of financing for Kandi, with the recent dilution of shares, how do you feel about the stock at these levels?" -Johnny B
At this time, I feel it is appropriate to share my response with you all.
Johnny B- Since I wrote this article, the Company has achieved several major milestones. It began first consumer sales in China in late Nov. It had a third vehicle approved for sale in China, the KD5011 Lithium battery powered car with longer range and higher speed. It announced a deal with Hangzhou, a city of almost 10 million population to begin initiating sales in Q1,2011. This, one of the initial 5 cities where full PRC subsides of up to $9000 per car will be available to consumers and this new car is eligible for the this subsidy. The Company announced its entry into it third Continent, Europe, with an initial order of 1000 cars to be delivered this year in Italy.
Yes, they did do an equity funding for 3 million shares at $5.50, but whether this was dilutive or not is a matter of perception. IMO, when a Company does a funding at 7 times book value and 25 times operating cash flow, that funding is not dilutive to existing shareholders. If anything it is accretive, particularly when taking into consideration that in the month since the financing, China has raised interest rates and tightened their reserves twice making debt funding much more difficult, the timing of the funding was either lucky or brilliant.
At the end of last year the Company had a negative $13 million in Working Capital. When this years Financials are reported in March, I expect working capital to have swung $35-40 million to a Positive $25 million and operating profits should have more than doubled year over year and exceed $10 million.
IMO, the only reason the stock is now trading at less than a year ago is a combination of indiscriminate prejudice against China Stocks, and poor placement of the 3 million share stock offering. Something that cannot be blamed directly on the Company, more-so its Placement Agent. Looking at all of the volume the stock has traded since the offering (18 million shares or six times the offering amount) and realizing the stock has declined over 20% since the offering should be evidence enough of poor placement. But poor placement is but a temporary event and particularly in KNDI’s case has created a potentially incredible opportunity for patient, intelligent investors.
While the current stock price is painful and disheartening to some long term holders, the now strong financial position and recent very positive fundamental events, IMO, has now assured the companies foothold as a serious competitor on three Continents in the potential Trillion dollar Electric Vehicle Sector. A current situation that no other public Company with even ten times the current market cap of KNDI, is so well positioned to successfully address.
With all that has recently been achieved, it seems that future growth will be inevitable with only the degree left in question. This no matter who its shareholders are.
Art you wrote: "With all that has recently been achieved, it seems that future growth will be inevitable with only the degree left in question. This no matter who its shareholders are."
I really do appreciate all your work keeping us informed on Kandi, and I am hopeful that one day the stock price will rise again. That being said however, and with all due respect, this last post of yours is a perfect example of delusional thinking about investing. NO COMPANY'S FUTURE GROWTH IS INEVITABLE!!! Especially an upstart Chinese micro-cap!
Benfmd, Art's thinking doesn't seem delusional at all to me. He stated what I consider to be facts. He then stated that it SEEMS that future growth is inevitable ... obviously that part is his opinion, not a statement of fact, and not at all delusional. On the contrary, with all that has recently been achieved, I think it's a perfect example of a good investment.