LiveWire: A Pure-Play Electric Motorcycle Stock
Certain brands have unspoken connotations that society universally agrees upon. It’s why you never see a jacked-up dude driving a Prius with a dime piece in the passenger seat. A Prius is for the single guy with a dozen female friends he spends time courting, none of whom would touch him with a ten-foot pole. But a guy who drives a Harley and doesn’t call you back, now we’re getting somewhere. There’s a reason motorcycle clubs who wear the 1% patch only drive Harley Davidson motorcycles with some rare exceptions.
When we first looked at Harley Davidson’s plan for an electric bike, we were skeptical. Wouldn’t such a bike tarnish their grease and leather macho image? That was four years ago when we wrote about 7 Electric Motorcycles You Can Buy From Startups Today. In a later piece on a Kiwi electric utility vehicle, we opined that this electric bike stuff just wasn’t going to fly with most of the world’s authentic riders.
If you happen to be an experienced motorcycle rider who has done hard time on the streets and trails, you know that this electric bike stuff is cute and all, but only a total tool would be seen riding one. If you want a real road cruiser that turns heads and gives you that visceral feeling of power and class, pony up $35,000 and buy a brand-new Big Dog K9.Nanalyze
This is what a Big Dog K9 looks like.
And this is what a LiveWire electric motorcycle looks like.
If you’re a shop that’s selling both bikes, you’re going to be attracting two distinctly different clienteles. Perhaps that’s why today, LiveWire’s website has been scrubbed of all Harley Davidson logos and is being spun out by Harley into its own company (can’t imagine why) which will soon become publicly traded. It all starts with a special purpose acquisition company (SPAC) called AEA-Bridges Impact (IMPX).
About LiveWire Stock
Shares of Harley Davidson Inc (HOG) soared +14% yesterday on the news that they would be spinning out their electric motorcycle division – LiveWire – using a SPAC. Perhaps investors were applauding the company for moving past a motorcycle that was launched in 2019 and failed to gain traction (more on this in a bit). Or maybe HD investors realize that Harley’s SPAC will result in a bunch of Reddit morons pumping up the shares of a well-known brand while Harley laughs all the way to the bank (Harley will retain 74% ownership of the brand following the SPAC). Whatever the reason, the LiveWire motorcycle no longer appears to have – at least on its website – any more associations with Harley Davidson.
The SPAC deck is probably one of the worst ones we’ve seen in a while with nearly everything focused on a forward-looking view of the future. One number was suspiciously absent from the deck. If you first debuted the LiveWire several years ago, how many units have you sold? That’s probably the single most important question someone would ask and here’s why they probably don’t want to answer it.
We did a double take here. Are there some zeroes missing? Apparently not. The company only sold 387 motorcycles in 2021 which brought in $6 million in revenues. The math seems to roughly add up (387 X $21,999 = $8,513,613). To put that number in perspective, HD sold 109,500 motorcycles in the first half of 2021 alone. If we annualize that number, here’s what sales velocity looks like:
- LiveWire – one motorcycle a day
- Harley Davidson – 600 motorcycles a day
LiveWire is not doing the sort of numbers we’d expect to see from a product that’s been available for several years now. Maybe it’s the $21,999 price tag, maybe it’s the association with Harley, or maybe it’s because motorcycle riders just don’t care about electric motorcycles.
An article by Electrek yesterday talked about how a company called SONDORS has developed a $5,000 electric contraption that they claim is “outselling the largest electric motorcycle manufacturers in the US: Zero Motorcycles Inc and Harley Davidson’s LiveWire.” Called the “metacycle,” a better name for it might have been the “betacycle.” Here’s their two-wheeled abomination alongside another electric vehicle they developed that’s equally as hideous.
The company hasn’t released any hard sales numbers (nobody seems to want to), but all three “are estimated to see annual sales figures for electric motorcycles in the low four figures.” Enough said.
Investing in an Electric Motorcycle Stock
Harley’s decision to do a SPAC merger is quite clever. Attract people with the ubiquitously known Harley Davidson brand and sell them on the electric vehicle thesis. While LiveWire comes with an impressive pedigree, the company is on its own now. Are electric motorcycles really going to attract enough riders to enjoy the sort of massive growth we’re looking for in any given investment thesis? We don’t believe so.
The electric motorcycle thesis will likely draw attention from those investors who have so much money that ROI takes a second seat to whatever cause they want everyone to know they believe in. ESG investors will likely be attracted to LiveWire, but we’re having a hard time seeing why. Motorcycle riders are already consuming so little petrol that moving to an electric vehicle makes little sense, relatively speaking. If a rider is risking their life to drive a Harley Davidson which averages 48 miles-per-gallon, they’re not going to forgo the rumble of that motor just so everyone who sees them thinks they care about the environment.
Will LiveWire stock go “to the moon” when all the Reddit FUD FOMO YOLO types take the story and run? It very well might, in which case you’ll see the stock price driven by speculators, not investors. LiveWire is a stock we’ll be avoiding along with the entire electric motorcycle thesis until someone can produce a reasonably priced product that doesn’t look like sin and that real riders want to buy.
If you’re thinking of climbing on board as an investor anyway, be aware of how richly valued this stock is at $10 a share. At $6 million in 2021 revenues and a $2.31 billion market cap, we get a simple valuation ratio of 385. To put that number in perspective, LiveWire shares would need to trade at $1.04 before we’d consider investing in the stock. We also don’t invest in any company that hasn’t achieved meaningful revenues (defined as $10 million per annum or more).
Electric vehicle makers that forgo the traditional the traditional IPO offering in favor of special purpose acquisition companies should be avoided in general. There’s a reason they took the SPAC route to the stock market, and it’s usually because their business isn’t seeing any traction.
Motorcycle riders have an unspoken bond which may stem from the understanding that even the most careful motorcycle rider is still taking a huge risk to be on the road so unprotected. It’s why when riders around the world pass each other on a highway in any direction, they’ll always exchange a wave. It’s why we have motorcycle clubs in the first place. Electric motorcycles won’t be exempt from these cordial exchanges between riders, but they’ll never offer up the same sort of thrill you’ll get when you crank that throttle and hear the exhaust rumble.
If the SPAC merger goes through as planned, shares of LiveWire will trade under the ticker LVW.
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