Ideanomics (NASDAQ:IDEX) is up over 160% since the first of the year. The company is part of the electric vehicle (EV) sector, so it wouldn’t be the first EV stock to see its stock price go to the moon with no revenue. However, I can’t think of a rational reason why investors would buy into IDEX stock.
I wrote about Ideanomics for the first time in December. At that time, I was focusing largely on its EV business. Simply put, they are a middle-man financial company that connects consumers with an EV solution.
Since my article, the company announced a $35 million deal with BYD (OTCMKTS:BYDDF), and Will Ashworth gave another example that shows the company’s role as a middle man. Ashworth explained that, according to the terms of the deal, Ideanomics will buy vehicles from the Chinese EV company and sell them to ride-hailing companies, providing the financing to go along with the vehicles.
Right now, Ideanomics (which started as a media company) seems to be many things. They have a fintech business that incorporates blockchain and artificial intelligence.
Ideanomics appears to have two potentially viable businesses, but it remains to be seen if it has a core competency in either one. The larger question is whether the company will have an addressable market as the price of EVs begins to come down.
Good News, but Not Enough of It
Ideanomics has delivered news that could give the stock a lift, but the news is not enough to justify a gain of over 160%.
I’m referring to is the acquisition of Timios Holdings, a title company. As Matt McCall wrote recently, it’s difficult to see where Timios fits into the company’s business model. Another piece of news was the purchase of an electric vehicle charging company, Wireless Advanced Vehicle Electrification (WAVE). The cash/stock deal was valued at $50 million.
McCall’s article makes the argument that Ideanomics seems to have purchased WAVE at a huge discount to the valuation of other EV charging companies. The question is why WAVE was willing to get bought on the cheap?
IDEX Stock Looks Like a Hot Trade
In December I wrote that IDEX stock may turn out to be a good trade, but not an investment. Sure enough, in 2021, the company’s stock has soared 163%. From what I can see, the stock is being actively traded by day traders.
I recommend you read what Mark Hake has to say about the situation.
“I suspect the way an equity raise will happen is that IDEX stock will get a traditional pump from its capital raise operator hands. Then the dump will happen,” Hake writes in his compelling argument. “I have seen this all the time before. Hopefully IDEX stock will be higher once the back-end dump from the short-term hands in the stock tapers off.”
Let the Buyer Beware on IDEX Stock
I just don’t see anything coherent that justifies a 160% price movement. The company is burning cash and seems to be caught in a cycle where it will have to continue to dilute its shares to raise capital. This in turn will negate whatever meager revenue their acquisitions provide.
Some have compared Ideanomics to Nio (NYSE:NIO) and predict a share price that will reflect that.
I suppose the argument is that the Chinese government will get involved to accelerate the transition of commercial fleets to EVs. Fair enough, I was wrong on Nio too. But at least let the company prove it to you first.
The last word I’ll offer about IDEX stock is simple. In most cases, penny stocks are penny stocks for a reason. Their low price is appealing to traders who see an opportunity to exercise a swing trade. And that’s what Ideanomics appears to be at this moment.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.