Where Does It Go?

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Perhaps you’ve heard of the latest meme stock: Luminar. It was started by a 17 year old kid. He started at Stanford, but he dropped out to work on the company, thanks to a Thiel Foundation Grant. Now, at 25, he’s taken it public via reverse merger. He’s got a net worth of $4 billion on this beast. It has, as you can see, roared about 300% higher in a matter of days. The ticker is LAZR:

The company makes the technology, called lidar, that lets self-driving cars “see”. And the press has been gobbling it up…..

Elon Musk, who knows a thing or two about self-driving technology, has described the lidar technology in this way: “Lidar is a fool’s errand, and anyone relying on lidar is doomed.” So, yeah, not a ringing endorsement.

I’m reminded of another red-hot electric car technology company from earlier this year which had the same jaw-dropping path.

Oh, sorry, that Nikola stock chart is out of date. Here, let me show you what happened since then.

So when stocks like this completely crash, where does the money go?

Nowhere! Whoever sold it keeps all that sweet, sweet cash. It’s just that in this economy of ours, an entirely new form of “cash’ is stock certificates (digitally speaking) and those can inflate or deflate very quickly.

Think of it as a stupidity tax. Or, more kindly, a greed tax. If whoever is gobbling up LAZR at $41 per share finds later it is worth $5 per share, the cash the gave to someone else is still cheerfully in that seller’s bank account. It’s just that the hapless buyer will find that his new “cash” – – the LAZR stock itself – – buys a lot less bread and eggs than it did before.