Another new lithium battery play looking to go to market via a despac. Merger vote is on 1 Feb
Tech is supposedly superior and more commercially scalable vs. peers such as Solid Power (SLDP) and Quantumscape (QS) + also backed by auto strategics such as Honda, Hyundai and GM, amongst others. Like its peers this is very early stage growth with commercial production & revenues only commencing from 2025.
However given the current market sentiment towards growth names and recent performance of QS and SLDP post despac (down >20%), I reckon this will trade down once the NAV floor is removed.
IV is quite elevated and puts are looking fairly expensive so still thinking about how best to play this. Might open a 7.5/10 put spread or run negative delta by selling calls while holding some shares
Interested! These despac put plays seem to be quite reliable these days… I’ll see if I can look into this over the weekend and see what I can dig up. Setting this to “Watching”.
At a glance it looks like others are thinking the same as you, based on the call to put ratio on the Feb chain.
[size=4]Battery Tech[/size]
I’m not able to comment on the differences between the two battery techs (solid state vs hybrid li-metal) as this is beyond my expertise, but here is how each company shows it in their Investor Decks, which is pretty funny to look at side by side:
[size=4]Battery Storage[/size]
For both companies, increasing battery size is one of the main goals as it looks like you need to achieve 100 Ah for electric vehicles(?). Both companies have similar timelines of producing 100 Ah batteries from 2022-2024, but it does look like SLDP is ahead of SES at present time.
SLDP is already producing 20 Ah batteries with 22 layer cells.
SES is producing 9 Ah batteries with <20 layer cells.
[size=4]Conclusion[/size]
Based on my noobie battery DD, I think SES and SLDP should be valued similarly.
At their SPAC valuations, SES is valued ~2.4X of SLDP. SES looks like an easy fall to ~$5.
Meanwhile, we also have QS at ~7B and they’re only at 4 and 8-layer cells, with Volkswagen as their only meaningful partner. QS is far far behind SLDP and is ridiculously overvalued. But I digress.
Puts on $IVAN. I’d go with Feb 7.5p or a lowball on Feb 10p. Spread’s wide on the 10p.
Are there any things similar to HLGN with shares getting dumped on the market? Bc if not, wouldn’t QS be a better puts play given the high price on puts for IVAN? Better pricing on puts for QS from what I can see, and on a fundamental basis, we all know this thing is ridiculously inflated. If these all end up going down, I’d expect QS to go down harder and you get a better price on puts to start.
How early should we buy Feb puts? The stock should trade sideways at $10 until the the redemption floor is removed. Does IV usually increase leading to the vote? If not, then it seems like if we buy too early, then we just suffer theta decay for no beneficial purpose.
I ran the numbers just to get a sense of relative valuation and while IVAN is the ‘cheapest’ based on these metrics, these far off in the future projections really depend on them being able to execute per their plan.
Of course, the same principle applies to SLDP and QS as well and they could definitely see further declines too if growth sells off further given they are also many years away from commercial launch
@Kevin since the merger date is only a week away, I think we’re pretty much near peak IV, which is drowning out the effect of theta:
@hansolo the floor will fall away a few days before the merger vote, so very likely Tuesday, the 25th, Which is actually just two trading days away. (Could be Wed too… I always get confused on the math here.) This is nice as it gives our Puts a few extra days to fall.
Also, thanks for running the valuation comparisons! For some reason, QS has this standing in the segment like IONQ does - great, promising technology, but the financials are mind-numbingly parabolic, yet market is somehow allowing them to perpetuate this fairytale. I just don’t think the market has patience for this kind of nonsense anymore.
The difference with QS (or IONQ or the like) is that those actually have more faithful supporters so it will likely be a glide back down to earth, vs a crash for the lesser known peers which has a smaller following, which I expect to more or less crash back down to earth. So it is unlikely I’ll get QS puts.
Yeah I was thinking the meme energy behind QS is the one thing that gives me pause. I do wonder whether retail is about to fade away for the short term as they all get completely railed by the market though
