The EV SPACs are running out of juice

EV SPAC land is looking as bleak as ever with a pair of filings in the past week showing that money is increasingly hard to come by. Without more capital, we may see a new pileup of crashed electric vehicle companies, so this news is concerning.

First up is Arrival. The company’s latest financial life line — a term loan facility — has been quickly quashed, leaving it with few options to continue operations.

We last heard from the U.K.-based commercial EV company back in July 2023 after it ended a deal to merge with a special purpose acquisition company (SPAC). Yes, that’s right, the company that went public via a merger with a SPAC was going to merge with a second blank-check company called Kensington Capital Acquisition Corp. in a bid to avoid bankruptcy. The SPAC with Kensington had a pro forma enterprise value of $524 million.

That deal was called off in July, mere weeks after it was first announced.

A dash for cash

Why was Arrival so strapped for cash to pursue a second SPAC deal? And why did it come back into the news this week for financing-related disclosures? It lost too much money, for too long, and was too far from having material revenues.

In numerical terms, Arrival told investors that it closed 2022 with $205 million worth of cash on hand. Not bad, but the company had burned through $126 million (negative operating cash flow) in the fourth quarter of last year. The company torched less cash in Q1 2023 — a comparatively modest $75 million — but that took it down to just $130 million in cash on hand at the end of the first quarter.

We are now nearly through the third quarter of 2023. Arrival, which reported zero revenue in 2022, needs more money.

Hence, the second SPAC that went nowhere, and more recently, a term loan facility that was announced in August. That allowed Arrival to draw down $5 million — cash that we presume was very useful at that stage.

But that deal also went kaput. A September 15 filing from Arrival said that the bridge financing had been accelerated and terminated. So far as we can tell, that means that it was pushed to its conclusion as fast as possible and yanked. For Arrival, which might have had eyes on the other $10 million that was included in the original deal (and was not yet drawn down), this was a poor outcome.

It’s getting nasty. Arrival said that an “exit fee” that one of its subsidiaries may owe is in contention, and that may require litigation to settle. Taking no stance on who is in the right in the potential case, Arrival wanted more capital, not more conflict, so no matter who wins, the news is bad for the company.

It’s not just Arrival

While the Arrival news would be enough to warrant our attention, other companies are similarly in the news. Canoo, another EV SPAC with effectively zero revenue, is struggling as a public company.

The troubled electric vehicle company gave notice that because of its continued basement-level stock price below $1, which had triggered a delisting notice, it would be moving to a different tier in the Nasdaq Exchange. It transferred its securities from the Nasdaq Global Select Market to the Nasdaq Capital Market at the opening of business Monday. It will continue to trade under the symbol GOEV and GOEVW.

Canoo is worth 47 cents per share today, giving it a value of less than $300 million per Google Finance data. Arrival, in contrast, is worth $1.49 per share, but a mere $22.4 million, also according to Google Finance.

Arrival and Canoo are hardly the only EV SPACs to struggle over the past 18 months, either. Lordstown Motors filed for bankruptcy in June and sued its one-time savior Foxconn. Electric Last Mile Solutions filed for bankruptcy in June 2022, just 12 months after going public.

And most recently, Proterra — a well-established commercial EV company that actually has revenue — filed for bankruptcy in August.

And, of course, there’s Nikola, the EV SPAC that kicked off the SPAC blitz. Nikola experienced quite the pop in share price Monday after the company announced that Mary Chan — a managing partner at VectoIQ Acquisition Corp., the SPAC that Nikola merged with to go public — would be its next chief operating officer.

Chan is coming in just a month after her fellow VectoIQ Acquisition Corp. partner Steve Girsky stepped in as Nikola’s CEO.

This is what the circling of the SPAC wagons looks like. But is it too late for Nikola, which has suffered from a string of internal problems, including the federal indictment of its founder and a recall in August of all 209 of its Class 8 battery electric big rigs?

What happened?

The fresh news of struggling from Canoo and Arrival are more final icing touches on an already-baked cake than anything entirely de novo. Still, they illustrate just how far off the rails the EV-SPAC boom has gone.

Rewinding the clock, you can see why some thought that the deals made sense when they were initially struck: Electric vehicle sales were rising, money was cheap, and capital was flying around the private and public markets. But when the tide went out — or when the music stopped, pick your cliche — suddenly a number of high-burn, long-time-to-cure EV companies with no top line and plenty of red ink were marooned as nascent public companies.

Once capital went away, they were suddenly not the next big thing, but the next big bust. And break they have.