Ehang Stock Update | CEO lies ! Short Squeeze Rumours | EH Stock News
Hi Everyone, Another Ehang Video. We will talk about some internal plans of Ehang, which were not disclosed in the earnings release. It will be very interesting, so stay tuned. It aligns very much with what I said in my last Update to the earning release.
If you did not watch it yet, I will put it up here and in the description below. We will also talk about short interest and the short squeeze myth. Of course, we will also have an overall update on your favorite stock Ehang. But first of all, welcome to high school drop out's advice. If you need subtitles, click on the subtitle button. If you want to join my discord channel, you can do that with the link below in the description.
Sometimes it's difficult for me to check out the comments because most of them get filtered out by Youtube from time to time. We have another big drop of nearly 12%, and we are trading at $24.60 with a market cap of 1.35billion. On a technical standpoint, we are creating lower lows on several occasions already. There is a lot of pressure pushing the stock down.
I can imagine we can get closer to the $20 support mark. Many people still need to digest the earnings release and are likely to follow the big movement. No matter if it goes down or not, those kinds of traders and investors only try to be part of a trend. In Ehang Scandinavia, we see that Ehang is starting its drone trials. In my previous Ehang updates, I did report that they want to ship small cargo for medical uses via Drone.
These are the trials to that project. The project is also tied with other European countries. The test results of the trials will be shared with other European countries. Now let us talk about the Short Interest rumoor and the that the short squeeze should happen soon. Let me show you some data.
We see that the "perfect to float" has increased to about 7%. Let me explain this part to you so you understand how short squeezes can happen and what dynamic needs to be provided for a potential short squeeze. You see, we have 54.7million outstanding shares, we know that the CEO and their directors hold over 40%, so there are 31.7million shares on the market. This is the Float.
We have 2.2million shares that have a short interest, so this means, 2.2million divided by 31.7million shares, is 0.069 which translates to 7%. The short sales volume, however, is having an uprise. As you can see here, we have a short sale volume ratio of 14%.
So it 7% on last month or 14% on a day in April a lot? It's not a lot, but it's not little either. Let me give you few values so you have a better relation to the numbers. The average stock of the SP500 has a short interest of 3%, so Ehang, at being at 7% for the month, is double that amount. But will this amount result in a short squeeze? No, short squeezes happen, usually when the Short Amount is getting close to 25%, so we are still far away from that amount.
We also need to take another value into consideration. The Value is called days to cover. Let me give you an example, why this Value is so important.
When Short interest traders open a short position, they will borrow a stock and sell it for the current price. He does this hoping that the stock goes further down, so he can buy back the stock and give it back to the guy who borrows it from. The guy who lends the stock gets a little Interest in the stock but can not sell the stock when it goes up or down. Base on this dynamic, time pressure can be built on the short seller. Imagine a bunch short seller has to return their stock in 3 days and did not buy the stock for cheap yet, the price is around at around the price they sold it for and the days to cover is on one day. When the days to cover are only one day, the short sellers can all get their stock and return it to the lender and would end up losing nothing.
There are just so many stocks out there for them to grab. If the days to cover is at six days, that means that only half of the short sellers can buy the stock for a breakeven price during this three day of trading because the typical trading volume of the three days is only half the volume of stocks which were shorted. For example, if each day there are only 30 stocks that get traded, then you would have 90 stocks in 3 days, but now the short-sellers have shorted 180 stocks, which they need to return to the lender, so they will fight for the 90 stocks pushing the price higher and move more potential sellers to sell with higher prices. This is why the days to cover are so important. Now you understand that with one day to cover, there is no short squeeze possible because so many shares get traded in comparison to the shares which need to get bought to return to the lender. Now that you understand the percentage to float and days to cover, I want to show you this.
This is the short interest history of Ehang. You see that we had higher days to cover in October and November last year. We also see that the daily share volumes are higher now than it was in the past. It will get more apparent in my next source. You see that the share volume in history was very low.
This means a small amount of short interest of 200000 stocks would have been way more difficult to cover than 2million nowadays. So there is a lot of misconception out there, and I hope that I can explain this to you, so you are not putting your hopes on wrong values. You see in the green box that the Days to cover ranged between high as 13 days to 6 days. I told you that a short squeeze could happen when the Value of the days to cover is five or higher, so let me show you what happened to Ehang. Have a quick look on your left. You see, the Period of this high short interest is from May 15th to June 30th.
Now let us have a look at what happened. Nothing happened last year. There was no short squeeze at all because even the values were there for a short squeeze to happen. Nearly 14 days to cover this is a scary number for a short seller. Imagine you have to return your stock in 3 days, but there is just so little trading volume, which you need to compete with other short-sellers.
You see that the shorters just shorted less over the time period because the buyers and shorters were pretty much in the balance, so shorters could not make any money and left the position. You see how the 13 days to cover reduces over time. If we would have a catalyst event, like Ehang, get approved by the FAA or any other big positive news, the stock would naturally attract more investors, pushing the price higher and bringing short-sellers in panic mode, which will explode the stock. We saw this catalyst with RKT, Rocket Company with their earning release, but you also see it went down again because short sellers were doubling down and could suppress the buying pressure. So I hope you don't get spoken out when you see that the short interest is increasing. You see that the Short interest in volume get's higher, but this is also based on that we have more shares on the market now, and the trading volumes are increasing.
So always also pay attention to the percentage to float, days to cover, and when those numbers are given, you still need a catalyst that puts the stock in an imbalance. You need to imagine the investors and short sellers on a scale. When there is no momentum, nothing happens, with a catalyst news, negative or positive, will bring some movement in the stock. Based on this observation, I don't see a short squeeze happening in Ehang any time soon. I am a bullish long-term Ehang investor, but I want to be honest with you and not building hype around the stock.
Here is some good news, we have a $33 target from Zack, but on the other hand, Morgan Stanley, we had a downgrade. I don't give much Value on price targets. It does not matter if we hit $50 by next month but have to visit $25 first—all we need to know that we will be around 500 in 5 years. If you want to drive from Las Vegas to LA, you will not count how many left and right turns you need to make and how many up and downs you will encounter during your trip. You will just know the trip will be around 4 hours. The same applies to long-term stock investment.
Now I got this topic covered. I want to move to the most bullish news for Ehang. You guys know that I always care about what the CEO says and what his vision is. Today is a day where we leak his company. There is a letter circulating which he gives to his interns and internal Staff.
This source is in Chinese. In this letter, he describes how to archive the four strategic goals of Ehang to be a successful company. Let me read this part of the letter to you. "We believe that in the future, people will use EHang's air taxi services as easily as using taxis/Uber; similarly, people will experience the convenience of EHang's logistics, greatly improving logistics efficiency, and we will become SF and UPS in the air. " Most viewers and subscribers know about Ehangs ambition, which we talked about in previous videos.
This confirms again that it will not settle with just being a drone manufacturer. If we see institutional investors and loans for Ehang coming in, I am sure they will acquire companies in that direction. Now have a look at this.
The first step he wants to do is create various products, for short and long-range to cover all the future needs. We know this process is very much done, and we hope for a successful presentation in May. Number 2.
Let me read this. " Gradually realize the transformation from "manufacturer" to "operation service provider," recruit talents from first-class transportation companies (such as Uber, Didi, Waymo, etc.), and build a first-class operation team." This just confirms again that Ehang wants to become the Uber, DHL, UPS, FedEx of the air. I am happy that he said, " Soon, we will introduce more powerful talent incentive policies, optimize our salary system, and stimulate everyone's entrepreneurial passion " He is willing to pay more, and we saw from his earning release that he is also willing to give out shares.
This will aligns by saying, " stimulate everyone's entrepreneurial passion." It sounds like he wants to find top talents and pay and share with the company's future success, which is fine. Let me read number 3 in full. " 3.
Focus on business and gradually divest less related businesses. Carry out the divestiture or outsourcing cooperation of businesses that have little relevance to manned logistics services such as air media and smart cities, allowing the entire company to focus on the core strategic direction. " This aligns very much with what I said last time and with my way of thinking. I said I am worried that other branches of the company act as a slow horse.
I used the image of a coach and said that the coach could only move as fast as the slowest horse. In this couple of sentences, he said that he would give up those " slow horses " and outsource them, so the company can focus on the main business, which will be manned logistics. Number 4 is accelerating pilot projects, expansion, and getting certificates to be used internationally and in the broader market like tourism, transportation, and logistic, which make sense. But now for everyone who watches this video up to here. Let me show you the bomb news. 400 smart passenger/logistic aircraft in 2020.
Internally he is setting up a goal of 400 drones. But on the earnings report, he was saying 250 drones. ( Show 30 ) The company also only had an outlook of only 130million RMB to 180million, which are the numbers of 2019 and 2020. The business outlook was presenting no rise in revenue for 2021, but internally, they are striving for a 400% increase. He said that he knows that the goal is impossible and is a challenging goal, but me getting a clearer picture of how the CEO thinks, I think next year we will hear that Ehang was able to produce around 300-330 passenger drones, which would be in the middle of what he told investors and Staff.
To his Staff, he wants 400 drones done, and to investors, he said it would be 250 drones, so he can push his Staff to get close to that number even he knows is not possible, and he will over archive what he told the investors. Investors will be happy, and the Staff is getting close to the milestone, feeling great. If he told the investor they would try to deliver 400 passenger drones this year and miss, it will be a disaster for investors, and the Staff would be under so much pressure and feel responsible for their failure, which is not good for the working culture. From this behavior of the CEO, we understand that he does not care about the stock price as much. He is not pumping it, he is patiently building up it’s fundamentals. I think for us investors, we need to stay flexible in our minds.
When a company says one thing, it can mean something different, and it might have more meaning than the number they mentioned. Many investors and traders were taken the business outlook with RMB120-RMB180million as face value and sold their stock. We have to stay flexible and rethink what is going. With little basic math, we know the company had a 50 EH216 order and a total backlog of about 100 Eh216, which alone will exceed the 180million RMB from 2020. Let me show you the number of units.
You see, there were only 70 units in 2020. This means if all the other numbers remain the same, the 100 units in the backlog plus new order will generate more than the 180million RMB projected. I think many investors don't take the time to understand how a financial report is written. We have financial reports which try to exaggerate, but we also find financial reports which are written in a very humble way or in a very defensive way like Xpeng. The way they write those financial reports can affect the stock as well, and we, as long-term investors, need to understand the personality of the CEO and the company how they communicate with us.
There are a lot of hints, and when we understand them, we truly know what to do. Let me give you another example here. The CEO has around 40% of all Ehang stocks.
He could sell them at the peak of $100 per stock, and he would be a Billionaire, but he didn't sell, he still keeps all his shares, which means, he is not so money motivated, at least not for 1billion. He has bigger goals than this. This is how you want a CEO to be. So this was a gigantic update to Ehang. I hope that you could learn something here.
Anyways for legal reasons, let me tell you that I am not a financial advisor. I am just a guy on youtube. Please remember to do your own due diligence and hire a financial advisor if necessary. Please like, share, and subscribe to my video when you don't want to miss out on any new stock information and investment opportunity.
Thank you so much, and see you hopefully in the next video. Thank you bye