Never before have so many companies with no revenue pursued a public market listing at such high valuations. The froth is particularly evident in sectors like online gambling and nascent start-up companies. See: EV start-ups are Wall Street’s hot new thing. No revenue? No problem:

Companies at such a nascent stage are inherently risky and are typically funded by venture-capital investors as they build out assembly lines and sales operations. Instead, these startups are going public at a far earlier stage than is standard by merging with blank-check companies, before they have proven that they can manufacture their product or that they have a viable business model. Blank-check companies are publicly traded shell companies that merge with private companies, enabling the private firms to sidestep an initial public offering.

Even EV companies with world-changing, first-in-class products like Tesla offer gambling-grade investment prospects when priced at crazy multiples of sales and profits. Earning 50 cents a share over the past four quarters, at $422, Tesla shares are trading more than 840 times trailing earnings. 

Tesla shares and other ‘FAANG’-like favorites will be remembered (by those with financial memory, at least) as hallmarks of the 2017-2020 mania that was,  just as many other tech and pharma names were after 2000, and commodity and financial shares after 2008. The companies may well survive and thrive, but their present stockholders are unlikely to do as well.

Today’s speculative mania is evident in the appetite for special purpose acquisition companies (SPAC)–“blank check” shell corporations designed to take companies public without going through the traditional IPO process with investor protections. SPACs lure retail investors to invest in private equity-type transactions, particularly leveraged buyouts, and the financial sector reaps fortunes packaging and selling the products to the gullible and reckless.

Short-seller Jim Chanos, President & Founder of Kynikos Associates, discussed SPAC, Tesla, rampant financial fraud, and more with Hedgeye CEO Keith McCullough in a “Hedgeye Investing Summit” interview last week. Here is a direct video link.