Monetary tightening, the explosion in metal prices for batteries and the impending economic crisis are starting to take their toll on high-tech companies, but especially those in the electric car sector.
In a sort of euphoria reminiscent of the pre-crisis 1907 for the auto sector, numerous start-ups were born that were supposed to revolutionize the sector and that promised big returns on the basis of prototypes not yet in large-scale production. These companies were then listed on the stock exchange through SPAC, special financial vehicles created to raise capital and enter the financial markets. Too bad many of these SPACs are literally crashing.
One such company is Electric Last Mile, which set out to produce home delivery vans that saw their stock market value plummet, after announcing that, with no new funds, it will run out of financial resources in June. A document filed with the SEC states that: “The Company expects that, without obtaining further funding, it will have sufficient liquidity to continue operations until June 2022“. “The Company’s current projections reflect, among other things, the increase in expenses for professional services, employee retention costs and payments to suppliers“. “The Company is actively seeking potential sources of liquidity and is working to extend, as far as possible, its available cash during this process.“. Quotes plummeted and the company lost 94% in one year.
On May 24, in a filing with the SEC, the company announced that its quarterly report for Q1 (10-Q filed with the SEC) would be further delayed. The company said it has not yet filed the required annual report (10-K) for 2021. On May 18, it received a delisting notification from Nasdaq due to non-compliance with the fill requirements. In the US, these things are no joke and the SEC is investigating.
Another company with a similar history is Canoo, also without sufficient liquidity to continue operating. The company is currently under investigation by the SEC, regarding the merger with SPAC and its “operations, business model, revenue, revenue strategy, customer deals, earnings and other related topics,” in addition to the recent resignations of some company officials “. Obviously, an investor class action has started.
At the end of March, Canoo had $ 105 million of unencumbered cash on the balance sheet. According to his indications, he expects to burn about $ 200 million in the second quarter and has no revenue. If he could immediately raise $ 600 million, he would extend his life until 2023, but to do what? Of course, the shares plummeted with creepy losses
Unfortunately we are not finished yet: another company born from a SPAC that does not produce cars, the Lordstown Car which has seen the value of shares plummet because money runs out, cars are not produced and financial resources are increasingly scarce and rarer.
When the shares of large companies, already in production, such as Rivian or Tesla, are in sharp decline, newco with an uncertain future go to zero and go bankrupt. This will be a very hot summer and there are doubts that many of the EV car projects that started in the excitement of Tesla’s success will make it to 2023. We will have a company death and historic capital destruction, but this is the price of the awakening from illusions.
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