Short Position Revealed! Aurora Stock Slides After Kerrisdale Capital Says Company Doesn’t Have Viable Business Model

Kerrisdale Capital on Tuesday revealed a short position on autonomous trucking company Aurora Innovation (AUR), alleging that the firm does not have a viable business model.

Kerrisdale said that the market for autonomous trucking is far too small and the profit pool available to Aurora from it is “puny.” Shares of AUR fell 7% on Tuesday morning. On Stocktwits, retail sentiment around Aurora stayed within the ‘bullish’ territory over the past 24 hours, while message volume remained at ‘low’ levels.

Kerrisdale said that Aurora’s self-driving architecture will never enable point-to-point shipping. It said that the best-case scenario is a hub-and-spoke freight system in which driverless trucks travel between terminals immediately adjacent to highways, and last-mile manned shippers pick up and drop off shipments from and to individual customers.

The firm noted that in trips less than 1,500 miles, autonomous trucking is too slow and expensive compared to manned trucking. Hence, when cutting out trips less than 1,500 miles, the entire market for autonomous trucking is just 1/10th of Aurora's claimed total addressable market of $200 billion, it said.

Kerrisdale pointed out that Aurora wants to sell just software, but hub-and-spoke freight services require hub infrastructure, which requires billions in investment. While Aurora is optimistic that some other firm will step up to put up the physical hubs, no one has till now, it said.

Meanwhile, executives at Volvo and Paccar, Aurora’s partners for physical trucks, told Kerrisdale that autonomous trucks will cost at least 50% more than regular trucks. In addition, there is competition from players including Daimler-Torc, Waabi, and Kodiak, who are taking a lower-cost approach, it added. “Autonomous trucking is a niche market, and Aurora will have to split it with better-positioned truck/component manufacturers, hub developers, logistics operators, and competition. $AUR should trade like a speculative small cap, and we think it will,” the short seller said while warning investors that they should “expect a decade of continuous dilution before arriving at a dead end.”

AUR stock is down by 5% his year but up by about 58% over the past 12 months. 

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