Exro Technologies will punish shorters, this investor says

Canadian battery and electric motor tech company Exro Technologies (Exro Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:EXRO) has yet to recover from a short seller attack from earlier this month, with its share price now down 35 per cent for March. That’s all the more reason to take advantage and climb aboard, says portfolio manager Bruce Campbell, who says Exro’s letter perfect response to the short is an example of the strength of management with the company.

It’s been a wild ride for Calgary-based Exro, which makes control solutions for power electronics and is now commercializing its tech, the Exro Coil Driver and Exro Battery Control System in the quickly expanding electric vehicle space.

Exro had joined the TSX Venture Exchange last fall and was already rewarding investors
with a triple when the stock shot up in early February on news of an order for its Coil Driver from LAND Electric Motorcycles in the US, along with positive testing results in a collaboration with Potencia Industrial of Mexico on the Coil Driver for electric cars. Those positive releases pushed the stock further, taking it from $3.78 to above $7.00 in the space of a few trading sessions.

Then the roof came crashing down with the release in early March of a report from short-seller Mariner Research Group. The report claimed that Exro’s technology had limited value and accused the company of misrepresentation including with reference to its partnerships.

That brought the stock quickly back to the $3.50-$4.00 range where it has languished, despite Exro’s point-by-point response to the attack.

Calling the short report “full of inaccuracies, innuendos and outright distortions,” Exro management said, “Exro has a focused business strategy with demonstrated execution, valued and validated partners who are deeply invested in the success of our development projects. As well as a strong leadership team from the Board of Directors to the Management team who hold integrity and continued execution to the upmost values with a strong bank account of over $40 million USD to deliver on our commitments.”

Looking at how they handled the issue, Campbell said, “Exro is one that we have a tremendous amount of respect for the management team. [CEO Sue Ozdemir] and her team have really done everything that they’ve said they were going to do. They’re in the electric vehicle market but kind of in a different way. They have a specific technology that builds more power and more torque for electric motors. One of the issues that you’re seeing with a lot of these electric vehicles is that they need multiple motors to drive different wheels because they can’t get enough power and torque, and so, what Exro has done is they’ve gone out and said, ‘Okay, let’s validate our technology,’ and they started small, starting with e-bikes and scooters and then they moved their way up to ATVs and into boats and now they’re into some vehicles. And they’ve continued to build out their technology and show that it can be actually done on a commercialized basis.”

“I thought they did a phenomenal job in responding,” said Campbell, president of StoneCastle Investment, speaking on BNN Bloomberg on Thursday. “In a lot of cases, the short report comes out and the management team talks about suing the short report people and so on. Instead, they just hit every point and said, ‘Look here’s everything that we said we were going to do, here’s everything that we’ve done, valuations on these emerging companies can be difficult but we’re really hitting all of the KPIs that we’ve said we would.’”

“I thought it was probably one of the best if not the best rebuttals to any short report that I’ve ever seen,” Campbell said.

Investment bankers Haywood Capital Markets is one of the companies with analyst coverage on Exro, and Haywood’s Colin Healey delivered an update to clients on the short report soon after its release. The analyst said his take on Exro is vastly different from that found in the short report.

“Our assessment of the current management team and Board differs significantly from the report. Exro has been continually adding to an experienced team and a deep Board with significant tenure at major electric, industrial and automotive companies. We see a very promising set of technologies that the ‘short report’ did not attempt to discuss the technical validity thereof or investigate in depth,” Healey wrote.

Still in the early stages of commercialization, Exro last reported its financials in late November where its third quarter 2020 showed no revenue and a comprehensive loss of $3.0 million.

With the share price down, Campbell said investors should be paying attention.

“The stock is off of a bit with the short report plus with the overall market [where] it’s been a little bit weaker here in the last little while, but it probably gives you an opportunity if you don’t own it to own it or maybe it goes a little bit cheaper and you can pick it up if the market continues to correct,” Campbell said.