Several electric car startups that have raised large sums from investors following Tesla’s rise are encountering potholes as they pursue next-generation vehicles.
The most recent crisis occurred at Lordstown Motors, which on Monday announced the sudden departure of two senior executives after warning last week that it needed more capital to keep operating.
Company officials are planning a series of events dubbed “Lordstown Week” later this month to boost investor support.
But local government officials are unsure of what to think of the company, which had discussed creating more than 2,000 jobs in a region plagued by factory closures.
“Am I confident? Not as much as a week ago,” Lordstown Mayor Arno Hill said earlier this week. “We are waiting and see what the next step is.”
There have been similar leadership shifts in at least two other electric carmakers that have recently gone public, raising questions about deals and highlighting the difficulties startups face in competing in the capital-intensive industry.
“It’s definitely more difficult for a small business,” said Jessica Caldwell, executive director of insights at Edmunds.com, highlighting the significant expense involved in building and maintaining factories and securing key components.
“Looks like Tesla is an overnight success story, which is not really the case,” she told AFP. “But they came along and disrupted the space among the automakers that have been around for decades. Everyone wants to believe the dream could come true.”
The Lordstown woes come on the heels of major electric vehicle (EV) announcements since the November US presidential election by Ford, General Motors and other auto giants, stepping up competition.
– Rising costs –
Lordstown Motors was started by Steve Burns in November 2019 after acquiring a recently closed Ohio auto plant owned by GM.
The company raised $ 675 million following an October 2020 merger with DiamondPeak Holdings, a special purpose acquisition company (SPAC) – essentially a shell company formed to merge with an operating company.
Lordstown Motors unveiled its flagship all-electric “Endurance” pickup truck in June 2020 when then-vice president Mike Pence toured its Ohio plant, nearly a year before Ford introduced its all-electric pickup truck. electric F-150.
Lordstown’s share price topped $ 30 in February this year, but the company’s fortunes started to change in March, when short-selling firm Hindenburg Research released a damning report which called Lordstown of “mirage”.
On Monday, Lordstown announced the resignation of Burns and CFO Julio Rodriguez after an investigation found Hindenburg’s assessment to be “in many ways false and misleading,” while acknowledging that some of his own statements on vehicle preorders were “in some ways inaccurate.”
This followed Lordstown’s June 8 disclosure that it lacked sufficient capital to begin commercial production, and warned of its ability to continue operating.
The company’s capital spending had swelled in part because of “the stress the Covid-19 pandemic has put on the global automotive supply chain,” according to a securities file.
Lordstown shares fell after Monday’s management reshuffle, but rallied on Tuesday after its executives reaffirmed their plans at an event in Detroit to begin production in September, underlining “firm” customer orders , according to newspaper articles.
In a securities filing Thursday, Lordstown clarified some of those remarks, saying the purchase agreements “provide us with a meaningful indicator of demand” but “do not represent binding purchase orders.”
– Unfair advantage? –
Lordstown isn’t the only prospect for VE to stumble after being made public through a PSPC. These types of deals – which allow companies to enter markets faster than with a traditional initial public offering (IPO) – have exploded over the past year.
Usha Rodrigues, a professor at the University of Georgia Law School, described PSPCs as a “Vegas marriage IPO” because a legal loophole protects them from lawsuits if their plans are not met. that traditional IPOs do not benefit from.
Electric vehicle startups that have benefited from PSPCs now appear to be prone to turmoil. Nikola suffered his own crisis last fall when its founder suddenly resigned over allegations of fraud.
Canoo’s CEO and co-founder resigned in April, while Lucid Motors delayed production of its EV sedan in February after announcing a deal valuing the company at $ 11.75 billion.
IPO through a PSPC may have allowed some companies to get funds “before they earned it,” said Karl Brauer of Carexpert.com. “While there is nothing wrong with the PSPC process itself, if it leads to the premature financing of a business, it is more likely that the business will fail.”
Brauer noted that Tesla needed 15 years to become profitable, adding “this is a long and dedicated process, which you cannot shorten with a quick injection of money.”
jmb-jum / cs