Decided this is a new thread, rather than posting in the options thread.
Anybody thinking about shorting other parts of the car industry? What method(s) have you come up with? Anybody in particular you have in mind?
The big part of my investment thesis is that these businesses are bankrupt in less than 10 years. That doesn't mean that they will no longer be operating - there is too much brand equity if nothing else. But I do expect the current share holders to be wiped out, with lenders taking over as the new owners. I just posted the details of why I think this over in the Demise of the OEMs thread, but the 1 sentence version is you need willing buyers of ICEV and willing/able sellers of ICEV for there to be an ICEV market. That combination won't exist at the necessary scale for these businesses to still exist, at least not in the current form and value.
This is still a new idea for me, but looking at the first 2 companies I've looked at (Ford, GM), I like what I see (at least for this purpose). Both companies are refinancing about $40B in debt each year. The increasing interest rates this year will be increasing their interest expense as the debt rolls over. If its bad enough it'll turn into particularly bad interest rates, and in an extreme case jeapordize their access to the bond market.
Their current income level is adequate to make the interest payments and persuade lenders to refinance those $40B worth of loans each year. I don't know the impact of their changing business prospects and the interest rate changes, but its all going in the wrong direction.
If you've been thinking about this longer than I have, would you share how far along you're at? Do you know how you would short?
My initial thinking is for GM. The recent increase in cash distribution (share buybacks, increased dividend), decrease in EV investment, and rather large annual refinancing needs sounds like a good combo. The cash distribution also provided a nice juice to the share price - $25 to $36 in round numbers.
My first though is the Jan '26 $25 strike put at 1.80. I don't really expect bankruptcy during this first 2 years, but I see an easy path for the share price to go back to $25. The short analysis is really, really basic at this point
Anybody thinking about shorting other parts of the car industry? What method(s) have you come up with? Anybody in particular you have in mind?
The big part of my investment thesis is that these businesses are bankrupt in less than 10 years. That doesn't mean that they will no longer be operating - there is too much brand equity if nothing else. But I do expect the current share holders to be wiped out, with lenders taking over as the new owners. I just posted the details of why I think this over in the Demise of the OEMs thread, but the 1 sentence version is you need willing buyers of ICEV and willing/able sellers of ICEV for there to be an ICEV market. That combination won't exist at the necessary scale for these businesses to still exist, at least not in the current form and value.
This is still a new idea for me, but looking at the first 2 companies I've looked at (Ford, GM), I like what I see (at least for this purpose). Both companies are refinancing about $40B in debt each year. The increasing interest rates this year will be increasing their interest expense as the debt rolls over. If its bad enough it'll turn into particularly bad interest rates, and in an extreme case jeapordize their access to the bond market.
Their current income level is adequate to make the interest payments and persuade lenders to refinance those $40B worth of loans each year. I don't know the impact of their changing business prospects and the interest rate changes, but its all going in the wrong direction.
If you've been thinking about this longer than I have, would you share how far along you're at? Do you know how you would short?
My initial thinking is for GM. The recent increase in cash distribution (share buybacks, increased dividend), decrease in EV investment, and rather large annual refinancing needs sounds like a good combo. The cash distribution also provided a nice juice to the share price - $25 to $36 in round numbers.
My first though is the Jan '26 $25 strike put at 1.80. I don't really expect bankruptcy during this first 2 years, but I see an easy path for the share price to go back to $25. The short analysis is really, really basic at this point
