Weichai disclaimer, plus eMagin and other follow-ups -5

09:02 23-Sep-20

Westport has finally issued a nothing-burger press release this morning acknowledging Weichai's disclaimer, but providing no additional detail.  I think I've already said everything there is to say.

Tesla's almost 3 hour presentation has just concluded and the main takeaway is that the company estimates its own tipping point at about 3 years.  I see that as somewhat optimistic, but in-line with the overall projection I gave here.  The main innovations presented were a tabless battery design using a new form factor and a complete rethink of the manufacturing process, which I find technically interesting, though ambitious.  Reading a little between the lines, it seems like the company anticipates mainly using the LFP batteries I mentioned for high volume manufacturing of passenger vehicles and reserve nickel-based designs for heavier duty applications.  In discussion with subscribers today, I have had to re-emphasize that this is a stronger reason to abandon investment in Westport than today's earlier news. 

However, the realization that China is still jerking Canada around over the detention of Huawei's CFO obviously matters to the market.  Clearly there's interference, between WeiChai and either Westport or the Chinese government.  Otherwise, with a good relationship, Westport would at least have known about this further delay before it issued its own press release.  For those who want to go into what probably instigated the latest round of hostility, this article has recent details on the legal case. 

On 9/22/20 11:33 AM, Esekla wrote:

I was going to wait for Tesla's battery notes today before updating on Westport, but there are reports that Weichai has issued a disclaimer saying that it is still unable to sell the engine until it has had 700K km of testing. 

So far, there is no confirmation of this on the Weichai website that I can see, even though the company is said to be the source.  However, it's fairly common for companies to be slow in updating their own websites.  WPRT has given back the 20%+ gains it managed to hold onto after Friday's announcement and I see that as appropriate since this gives plenty of scope for WeiChai to delay indefinitely and casts a huge amount of doubt on the quality of the overall relationship with Wesport.  It looks to me like the East-West politics that I've been harping on are still a factor, though that isn't stopping Intel from selling laptop components.

The strained relations could be seen as a vague long-term positive for eMagin's military business, but I'll also take the opportunity to note that Facebook did switch to LCD for the Oculus 2.  Furthermore, Apple's event and discussion with Zuckerberg seem to indicate that the industry is leaning toward the approach employed by Vuzix for future applications.

None of these developments concern me much from an investment perspective, though.  I was already staying away from WPRT and foreshadowed the pivot for EMAN.  The one follow-up that does matter to me is the successful launch of MemX this week, though VIRT shares have yet to take notice.  Real impact will probably take a quarter or two, and I'm happy to hold shares in the meantime, even though there has been some evidence of decreased market volume.  Ultimately, Virtu is much more than just a market maker and if this post show anything, it's that all the conditions are in place for volatility to return.