Xos share explodes 120 percent after a first American air force contract

The share of the electric vehicle maker Xos rose 120 percent in trading before the open on Tuesday morning. The trigger is the first defence contract in the history of the company. The American air force has selected the company to develop a mobile charging system for electrified support equipment and vehicles.

In after hours trading on Monday the paper had already gained 86.60 percent and risen from 2.09 to 3.90 dollars. During Tuesday the gain ran between 116 and 127 percent depending on when it was measured.

Xos was selected through a competition run by the rapid capabilities office of Global Strike Command. What is being supplied is a hardened version of its own energy storage system.

The short version

• The share rose 120 percent before the open after the American air force selected the company for a mobile charging system.
• Revenue over the past twelve months was around 45.99 million dollars, and 4.74 million dollars in the last quarter.
• The gross margin was 12.7 percent and therefore positive for the second quarter in a row.

Charging without a power grid

Technically this is about a mobile battery storage system that supplies charging power in places where no connection to a power grid is available.

That is exactly where the military use lies. Anyone electrifying vehicles and equipment in the field needs charging infrastructure that can be transported and does not rely on existing lines.

The agreement was concluded as what is known as an Other Transaction Agreement. That contract form is used in the United States for prototypes and bypasses parts of the regular procurement law in order to speed up development. It is therefore not a production order.

The cooperation runs to the end of 2027 according to reports. Production is planned in Byrdstown in the state of Tennessee.

The figures behind it remain difficult

The share price move stands in sharp contrast to the state of the business. Revenue over the past twelve months was around 45.99 million dollars. In the last quarter it was 4.74 million dollars.

The net loss in the quarter was around 6.89 million dollars. Free cash outflow was about 2.72 million dollars. The operating margin is clearly negative at around minus 51.6 percent.

Revenue and unit sales have fallen against the year before, and full year guidance was cut.

On the credit side stands an improvement the company itself highlights. The gross margin was 12.7 percent and therefore positive for the second quarter in a row. As the reason management names cost discipline and a shift towards products with higher margins, namely powertrains and the energy storage system.

Cash stood at around 13.2 million dollars on 30 June. The ratio of current assets to current liabilities is 2.0, and the ratio of debt to equity 0.68.

Two further pushes alongside defence

The contract is not the only new field. Xos has presented a more powerful variant of its energy storage system aimed at the power needs of data centres and applications of artificial intelligence.

In addition the company published a paper proposing its storage and solar systems as an emission free answer to a supply gap of 117 megawatt hours a day at the 2028 Olympic Games in Los Angeles. It sketches a concept with 37 units.

Three possible sales routes therefore stand side by side, namely commercial fleets, defence and power supply for data centres.

Warning signs at a paper below four dollars

Several observers point to the risks. Xos remains a micro cap with considerable price swings and a history of share consolidations that were needed to meet exchange requirements.

The most important point concerns financing. Companies of that size often use sudden price jumps to raise money through programmes for the continuous sale of their own shares. Xos has raised funds through share issues before. Every further issue reduces the stake of existing shareholders.

A technical indicator for assessing price moves climbed above 70, which points to an increased risk of a setback. Despite the jump the share remains clearly below its high for the year from the beginning of June.

The paper is currently followed by only three research houses. Trading volume on Tuesday was in the tens of millions of shares.

The company is based in Los Angeles.

Frequently asked questions

What was commissioned

The American air force has selected Xos to develop a mobile charging system for electrified support equipment and vehicles. It is a battery storage system that supplies charging power in places where no connection to a power grid is available.

Is this a production order

No. The agreement was concluded as what is known as an Other Transaction Agreement. That contract form is used in the United States for prototypes and bypasses parts of the regular procurement law. The cooperation runs to the end of 2027 according to reports.

What risks do observers name

Xos remains a micro cap with considerable price swings and a history of share consolidations. The most important point concerns financing, because companies of that size often use sudden price jumps to raise money through the continuous sale of their own shares.

This analysis is for information only and is not investment advice.