EV SPAC Frenzy Fizzles as Startups Fall Into Burning Zone

Zacks2023-06-29

The electric vehicle (EV) special purpose acquisition companies (SPAC) frenzy that swept through 2020 and 2021 has come crashing down, dashing hopes of investors. During this period, SPACs turned out ...

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During this period, SPACs turned out ...</p>\n\n<a href=\"https://finance.yahoo.com/news/ev-spac-frenzy-fizzles-startups-132700992.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>EV SPAC Frenzy Fizzles as Startups Fall Into Burning Zone</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nEV SPAC Frenzy Fizzles as Startups Fall Into Burning Zone\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-06-29 21:27 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/ev-spac-frenzy-fizzles-startups-132700992.html><strong>Zacks</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The electric vehicle (EV) special purpose acquisition companies (SPAC) frenzy that swept through 2020 and 2021 has come crashing down, dashing hopes of investors. During this period, SPACs turned out ...</p>\n\n<a href=\"https://finance.yahoo.com/news/ev-spac-frenzy-fizzles-startups-132700992.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"FSR","symbol_name":"菲斯克","start_time":0,"source_url":"https://finance.yahoo.com/news/ev-spac-frenzy-fizzles-startups-132700992.html","article_id":"2347330312","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/21nU072Z.Hxjq9FQZUOTRg--~B/aD00MTM7dz02MjA7YXBwaWQ9eXRhY2h5b24-/https://media.zenfs.com/en/zacks.com/1db4e5ad1cc5b39044281a9ed3d5a609"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2347330312","pubTimestamp":1688045220,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"The electric vehicle  special purpose acquisition companies  frenzy that swept through 2020 and 2021 has come crashing down, dashing hopes of investors. During this period, SPACs turned out to be the most popular course of action for EV startups to go public, helping them to avoid the complexity and strenuous paperwork associated with the traditional initial public offering . But, in 2022, EV SPAC deals slowed as investors were let down by the missed deadlines, unmet milestones and meager profits of the startups.Investigations by the Securities and Exchange Commission  have made it difficult for these EV startups to secure funding, resulting in SPAC financing losing its allure. The first major blow to the market came with Electric Last Mile Solutions, which declared bankruptcy in June 2022, approximately a year after its IPO debut. The company's accounting practices and apparent absence of an auditor drew scrutiny from the SEC.And now, besides filing for bankruptcy, Lordstown Motors ha","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"FSR":"菲斯克","BK4099":"汽车制造商","LCID":"Lucid Group Inc","BK4149":"建筑机械与重型卡车","BK4555":"新能源车","BK4551":"寇图资本持仓","IPO":"Renaissance IPO ETF","BK4562":"SPAC上市公司","NKLA":"Nikola Corporation","GOEV":"Canoo Inc."},"translate_title":"随着初创公司陷入燃烧区，电动汽车特殊目的收购公司狂潮不了了之","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"FSR":1,"IPO":1,"LCID":1,"NKLA":1,"RIDE":1,"GOEV":0.9},"content_text":"The electric vehicle (EV) special purpose acquisition companies (SPAC) frenzy that swept through 2020 and 2021 has come crashing down, dashing hopes of investors. During this period, SPACs turned out to be the most popular course of action for EV startups to go public, helping them to avoid the complexity and strenuous paperwork associated with the traditional initial public offering (IPO). But, in 2022, EV SPAC deals slowed as investors were let down by the missed deadlines, unmet milestones and meager profits of the startups.\nInvestigations by the Securities and Exchange Commission (SEC) have made it difficult for these EV startups to secure funding, resulting in SPAC financing losing its allure. The first major blow to the market came with Electric Last Mile Solutions, which declared bankruptcy in June 2022, approximately a year after its IPO debut. The company's accounting practices and apparent absence of an auditor drew scrutiny from the SEC.\nAfter a grueling 2022, skepticism among investors is rising as EV startups tread on thin financial ice, facing the make-or-break challenge of proving their mettle in a fiercely competitive market.\nLordstown Files for Bankruptcy\nIn a telling sign that the SPAC mania is over and EV startups are facing a tough time, U.S. electric truck manufacturer Lordstown Motors RIDE filed for bankruptcy on Tuesday. Moreover, the Chapter 11 bankruptcy, typically intended to facilitate business reorganization, took an unexpected turn as the company seeks to sell its Endurance truck assets. This raises doubts about what will remain of RIDE once the process concludes, signaling a potential conclusion to the Lordstown saga.\nLordstown made its Nasdaq debut on Oct 26, 2020, after completing a reverse merger with DiamondPeak Holdings. \nTwo years ago, the company warned that it might have to shut down due to dwindling funds. Last November, Lordstown inked a deal with Foxconn, the world’s largest contract manufacturer for electronics, per which the latter agreed to invest up to $170 million in Lordstown to aid the production of RIDE’s debut EV truck model, Endurance.\nThe company received a delisting notice from Nasdaq in April 2023 as its share price fell below $1 a few months prior and failed to rebound. The delisting warning prompted Foxconn to waver and it threatened Lordstown to withdraw from the agreement unless the stock listing predicament was resolved.\nLast month, Lordstown raised concerns over an ongoing dispute with Foxconn about the planned investment and the uncertainty of Foxconn fulfilling its funding obligations per the deal. Early this month, Lordstown admitted there was \"substantial doubt regarding our ability to continue as a going concern” in the light of insufficient cash to fund the production and sale of its much-anticipated Endurance pickup. \nAnd now, besides filing for bankruptcy, Lordstown Motors has sued Foxconn for fraud and failure to meet its commercial and financial commitments. Lordstown alleges that Foxconn's actions have caused significant damage to the company and its prospects.\nIrrespective of Lordstown's outcome after the bankruptcy proceedings, the filing serves as a reminder that, despite the surge of EV startups, the process of establishing an automaker from scratch and successfully launching a car to market is exceedingly challenging.\nAnd this brings us to some crucial questions. What lies ahead for other financially strained EV startups? Is the Lordstown story merely the start of a wave of bankruptcy filings, or will these companies manage to meet their deadlines and succeed?\nThe Cash-Burning Dilemma of EV Startups\nCanoo GOEV made its Nasdaq debut on Dec 22, 2020 by merging with Hennessy Capital Acquisition. Year to date, shares of Canoo have tanked more than 65%. This pre-revenue company is struggling with cash drain. In the last reported quarter, the company’s total costs and operating expenses were more than $81 million. If we compare this with its cash situation, the company ended the March 2023 quarter with $6.7 million worth of cash and cash equivalents, sharply down from $36.5 million recorded as of Mar 31, 2022.\nCanoo faces the daunting task of raising funds, made even more challenging by a stark decline in its stock value this year. That, coupled with the financial setback caused by SVB's failure, has significantly tightened conditions, making subsequent capital raises increasingly difficult and casting doubt on Canoo's future.\nElectric truck upstart Nikola Corp NKLA went public on Nasdaq after a reverse merger with VectoIQ on Jun 3, 2020. Once dubbed as the \"Tesla of trucking,\" the hype over the stock has crashed drastically, leaving investors in a sad state. The company incurred a net loss of $784 million in 2022, wider than $690 million in 2021 as elevated manufacturing costs and supply bottlenecks hurt the company, especially when surging inflation hit demand. What spooked investors even more was the going concern warning by the company.\nIn its 10-K SEC filing for 2022, Nikola said it may not have enough money to stay afloat in business a year from now. In the last reported quarter, the company’s cash/cash equivalents declined to $121 million from $233 million recorded as of 2022 end. Even if the company manages to raise sufficient capital to make it into 2024, shareholders will suffer from outsized dilution. Despite the cash injection, management has much to do to balance its massive cash burn against its existing funds. Year to date, the stock has declined 46%. \nFisker FSR made its NYSE debut on Oct 30, 2020 via a merger with Spartan Energy Acquisition. In the last reported quarter, FSR incurred a quarterly loss of 38 cents per share, wider than the Zacks Consensus Estimate of a loss of 28 cents. It posted revenues of $0.2 million for the quarter ended March 2023, missing the Zacks Consensus Estimate by 98.85%. Moreover, the company cut its production target for 2023. It now plans to produce 32,000-36,000 vehicles, down from the prior forecast of 42,400 units.\nTo investors’ dismay and as with most EV startups, Fisker's cash reserves have been dwindling. At the end of first-quarter 2023, the company held $652.5 million in cash and cash equivalents, down from $736.5 million as of 2022 end. However, the longevity of this funding— crucial for this production-driven business— is shrouded in ambiguity given the fact that the company is in a nascent stage and is grappling with high manufacturing and operating expenses amid low revenues. Year to date, FSR shares have declined 28%. \nLucid Group LCID went public on Jul 26, 2021 after the EV maker completed its merger with a blank-check company backed by Wall Street dealmaker Michael Klein. In the last reported quarter, LCID incurred a quarterly loss 43 cents per share, wider than the Zacks Consensus Estimate of a loss of 39 cents as well as the year-ago loss of 5 cents per share.\nInvestor sentiment in the stock has taken a blow due to poor execution, underwhelming production and deliveries, escalating costs, and a significant cash burn rate. The company generated $149.4 million in revenues in the first quarter of 2023, down from $257.7 million in the December 2022 quarter. Moreover, Lucid's total cost and operating expenses surged more than 40% to $921.6 million in the last reported quarter.\nThe company's cash reserves also experienced a sharp decline, plummeting from $1.7 billion at the end of 2022 to $900 million as of Mar 31, 2023. The substantial increase in net loss to nearly $780 million in the first quarter from $473 million in the fourth quarter of 2022 further underscores Lucid's rapid cash burn rate. With each passing quarter, maintaining confidence in the stock is becoming increasingly challenging. In light of Lucid’s financial struggles, the company is faced with the imperative task of selling a substantial number of vehicles to ensure its viability as a \"going concern.\"\nLCID currently carries a Zacks Rank #4 (Sell).\nYou can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.\nLast year, EV startup Arrival witnessed a staggering 90% decline in its stock price. In November 2022, it expressed concerns about its financial sustainability throughout 2023. The company took drastic measures in January 2023 by reducing its workforce by 50%. In the first quarter of 2023, Arrival's cash balance was $130 million, significantly lower than the $330 million it held in the third quarter of 2022 when it warned of a potential cash shortage by the third quarter of 2023.\nIn the span between the fourth quarter of 2022 and the first quarter of 2023, Arrival witnessed a depletion of $75 million in cash. Unless an urgent injection of funds is arranged, Arrival's cash reserves will soon be completely wiped out, compelling the company to seek a lifeline of financial support.\nFinal Thoughts\nAfter taking a shortcut to an IPO through SPAC mergers, most EV startups have been investigated for potentially misleading investors with unrealistic projections. This has resulted in diminishing cash reserves, putting immense pressure on startups that are struggling to scale up production while facing limited funding options in a turbulent economic environment.\nMoreover, the drop in valuations has made selling equity for much-needed cash less effective, leaving investors dissatisfied with the dilution of their stake, especially as established players like Ford, General Motors and others enter the EV space.\nThe road ahead remains uncertain for EV SPACs, with the need for sustained funding and doubts over their ability to deliver on promises. The current year is going to be crucial for EV startups as they walk a financial tightrope.\nAmid the challenges, companies that can beat financial hurdles and manage to stand out from the crowd will shine. Self-funded companies with scale and cost leadership stand a better chance of success. Thriving in this evolving EV market will require resilience, innovation and effective capital management.\nWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report\nFisker Inc. (FSR) : Free Stock Analysis Report\nNikola Corporation (NKLA) : Free Stock Analysis Report\nLordstown Motors Corp. (RIDE) : Free Stock Analysis Report\nCanoo Inc. (GOEV) : Free Stock Analysis Report\nLucid Group, Inc. (LCID) : Free Stock Analysis Report\nTo read this article on Zacks.com click here.\nZacks Investment Research","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2347330312"}