Shorters are wrong about Exro Technologies, Haywood says

A recent short report on Exro Technologies (Exro Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:EXRO) has the company pegged all wrong — that’s the take from Haywood Capital Markets analyst Colin Healey who delivered a flash update to clients on the matter on Wednesday.

Exro Technologies, whose share price has rocketed ahead since its TSX Venture debut last year on the promise of its advanced motor control technology, took a major tumble on Tuesday on the release of a short report from Mariner Research Group. The report questioned the value of Exro’s technology, the validity of its partnerships and even the integrity of the company’s management team.

Mariner’s report said Exro’s partnerships have “limited, if any value,” alleging that its partnership with Mexican power systems company Potencia Indusrial was replete with delays and no revenue while another vendor was “based out of a UPS store mailbox.”

Mariner said Exro exhibited a “pattern of obfuscation and exaggeration” and that Exro’s CEO Sue Ozdemir recently sold almost 20 per cent of her holdings with the rise in Exro’s share price.

The result was a 45-per-cent drop in share price in Tuesday’s trading. Meanwhile, Exro issued an Integrity Statement later on Tuesday saying it would prepare a detailed response over the next 48 hours to the claims made by Mariner.

“This morning we have seen our company stock react to a report that was in no way affiliated with Exro or its management team. This report was full of inaccuracies, innuendos, and outright distortions in what appears to be a short seller attack on the company. It is unfortunate that this attack is to the detriment of our valued partners and shareholders who have stood beside us on our growth plan,” said Ozdemir in the press release.

“We remain very confident about our patented technology, our business plan and organizational design, and the value of the products we can bring to market,” Ozdemir said.

For his part, Healey said his assessment of Exro’s management team and Board differs significantly from the report.

“Exro has been continuously adding to an experienced team and a deep Board with significant tenure at major electric, industrial and automotive companies,” Healey wrote. “We see a very promising set of technologies that the ‘short report’ did not attempt to discuss the technical validity thereof or investigate this in depth, rather [it] simply [implied] the tech would be challenging to commercialize supported by unsourced citing of third party statements which we cannot verify.”

“We look forward to the Company formally addressing the statements and claims of the short report in detail,” Healey wrote. “Our discussions with management and our own review of Exro differ significantly and materially from the short report and we believe investors should be patient as the Company prepares its response, after which we will provide our assessment.”

Healey pointed to potential errors in Mariner’s report, which, he said, seems to interpret Exro’s battery control system (BCS) as positioned to compete with electric vehicle original equipment manufacturer battery control software systems, yet by any quick glance at Exro’s press releases related to its tech, Healey said, a reader can see that Exro is focused on the second life properties of batteries.

“It’s difficult to understand how the report could draw this comparison if any reasonable effort was made to understand the tech,” Healey wrote. “Exro’s collaboration with SEA Electric to ‘showcase’ the BCS platform has a goal of demonstrating the second-life BCS-governed storage system in the second half of this year using truck batteries.”

As well, Healey casted doubt on Mariner’s claim about Exro’s intelligent coil switching drive, where the report said that “None of the EV OEMs or sellside analysts we spoke to were familiar with coil switching.”

On that front, Healey was dismissive: “In our view, in the hyper competitive race for dominance in the EV market, all technology that could increase efficiency, range or performance will be ‘on the table’ and in fact aggressively pursued. With respect to the ‘sellside analysts’ comment, we can assure you that if asked (we were not), we would have been ‘familiar with coil switching.’”

With his update, Healey maintained his “Buy” rating and $8.00 target price, which at the time of publication represented a projected 12-month return of 159 per cent.

“With more than $40 million in cash following the recently announced SEA Electric investment, Exro has the financial flexibility to accelerate proof-of-concept and deployment across multiple focus areas (coil driver and battery management),” Healey wrote.

Exro gave three press releases in early February on its partnerships, saying in a February 3 release that the Coil Driver’s in-house testing related to its Potencia electric car partnership had been completed and the company was now shipping its 100 Volt Coil Driver to Potencia for performance testing. Exro then announced on February 4 an agreement with LAND Electric Motorcycles to produce up to 2,000 units of the Coil Driver. On February 9, Exro announced an expansion to its strategic partnership with Australian automotive tech company SEA Electric to commercialize Exro’s Coil Driver and Battery Control System.