Lucid, Nikola, Arrival and others are low on funds and looking for more.
(Bloomberg) —
The writing was on the wall months ago: Electric vehicle startups that cashed in by combining with blank check companies were running out of money just as swiftly shifting market conditions were making it a real bad time to go broke.
Sure enough, over the last few months we’ve seen several of these EV hopefuls pursue paths that are less than ideal for their employees and investors. Five of them have announced plans in the month of August to raise a combined $9.5 billion to buttress their balance sheets, even if it may mean diluting existing shareholders. Another is cutting workers and tabling projects, and another agreed to a sale at a steep discount to its valuation at the time of its deal with a special purpose acquisition company.
Here’s a recap of what’s been a crazy month for companies that burst onto the scene during the SPAC boom:
Lucid
Lucid made the biggest EV SPAC splash last year when it raised $4.4 billion by merging with a blank-check company run by a former Citigroup investment banker. It’s been burning through that money and ordering multiple options off the fundraising menu since then.
The maker of $169,000 Air sedans raised more than $2 billion from a convertible debt offering in December. It then locked in an order for up to 100,000 vehicles from Saudi Arabia in April, and the following month lined up as much as $3.4 billion in financing and incentives for a new factory it’s building close to a major trading port along the Red Sea.
While Lucid ended June with $4.6 billion in cash, it also slashed its annual production target for the second time this year down to just 7,000 cars from an original goal of 20,000. The company notified investors after the close Monday that it will sell a mix of securities to raise as much as $8 billion, sending the shares down more than 6% on Tuesday.
Nikola
The battery and fuel cell-powered truck maker kickstarted the EV SPAC trend all the way back in June 2020. Months later, the company ousted its founder and executive chairman Trevor Milton. He’s now headed for trial facing securities fraud charges.
Nikola did manage to start limited production recently, but like Lucid, it’s casting a wide net for fundraising options. It sold $200 million worth of convertible notes in May, which helped the company end the quarter with $529 million in cash.
That won’t last long if the company keeps burning more than $100 million of cash per quarter. This week, Nikola announced an at-the-market offering it expects to bring in as much as $400 million.
Romeo Power
Nikola’s battery pack supplier Romeo Power reached a SPAC merger deal at a $1.33 billion equity valuation in October 2020. It finished the first quarter of this year with just $67 million in cash, and by June it received notice from the New York Stock Exchange about its shares potentially delisting because they were trading for less than $1.
Early this month, Romeo Power agreed to be acquired by Nikola in an all-stock transaction valuing the company at just $144 million.
Arrival
Other EV startups are hunkering down. Arrival, a mostly UK-based electric van and bus startup, once projected $1 billion in revenue for this year. It recently revised this forecast all the way down to zero.
Arrival has tabled its bus project to focus solely on delivering vans to United Parcel Service, which invested in the startup and ordered 10,000 vehicles two years ago. It’s cutting 30% of spending and roughly the same amount of its staff. The company finished the second quarter with $513 million in cash and has since registered for an up to $300 million sale of securities.
Faraday Future
With just $47 million in the bank as of last week, Faraday is in an extremely tight spot just over a year after raising $1 billion from its SPAC merger.
The Los Angeles-based startup has not only delayed the launch of its debut model, the FF 91, but it now says it needs to raise more money in order to start production, taking back what it was telling shareholders just a few months ago. To make matters worse, a capital raise is taking longer than expected due to a proxy battle being waged by the company’s largest shareholder, a group associated with its own founder.
While Faraday recently announced it had a framework agreement to raise as much as $600 million, the startup has in the meantime had to turn to an existing lender for a bridge loan of around $52 million. The shareholder group associated with the founder has been dangling funding options on the condition that the group get the chance to replace an existing board member.
Canoo
Of all these startups, Canoo ended the latest quarter with the least amount of cash: just $34 million.
The LA-based startup announced a “pre-paid advance agreement” in late July with Yorkville Advisors, a New Jersey hedge fund that’s been active in structuring deals with struggling companies that went public via SPACs. While this was potentially worth $300 million, the company only accessed $32.5 million from an earlier arrangement they announced would be worth up to $250 million.
Canoo also filed a mixed securities shelf registration of $300 million in May. This month, it added one more option to the list: a $200 million at-the-market offering. The company also made a big splash recently by locking in a deal with Walmart to sell as many as 10,000 electric vans. If the startup delivers on the full scope of the deal, the retailer will own more than 20% of Canoo’s stock in exchange for no more than $300 million.
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