Electric vehicle company Electric Last Mile Solutions warned on Friday that it could run out of money in June, at least a month earlier than previously expected, Bloomberg reported. Things only changed when they were able to raise more capital.
The latest forecast reflects Electric Last Mile is experiencing higher costs in several areas, including employee retention and supplier payments.
“The company expects that, without new financing, it will have enough cash to continue operating through June 2022,” the company said in the filing, adding that it is “actively pursuing potential sources of liquidity” to bolster its financing.
Electric Last Mile said in March that it had enough cash to fund operations between July and September. The company is under investigation by the SEC and has not had an auditor since May. two.
Shares are down 90% this year as the company faces some financial reporting challenges. Electric Last Mile has until May 31 to submit to Nasdaq a plan outlining how it will regain compliance with its listing rules.
BUBBLE COMING SOON?
Electric Last Mile is the latest electric vehicle company in trouble. Share prices of Faraday Future, Lordstown Motors and Electric Last Mile Solutions have all dropped more than 70% since going public through the company SPAC and all have faced SEC investigations.
SPACs, which are already popular with electric vehicle companies, allow companies with no significant revenue or proven products to be publicly traded without as much oversight as a formality. traditional initial public offering.
A sharp drop in electric vehicle stocks could be a classic sign of booms and busts. New industries always stimulate investors with the opportunity to sit in the “financial rocket” and step into wealth. But some publicly traded companies may be listed during less exciting times.
The dotcom crash of 2000 is an often cited example. According to William Quinn, a lecturer at the Queen’s School of Management in the UK, who studies stock market bubbles, although no new public company entrants into the electric vehicle sector has been found guilty of fraud, the fraud has is indeed typical of a stock market bubble. He points to the British bicycle bubble of 1890 when hundreds of new bicycle companies were listed on the stock exchange at overvalued valuations. Nearly all went bankrupt within a few years.
David Kirsch, a business professor at the University of Maryland and co-author of the book “Bubbles and Crashes,” said he hoped several electric vehicle startups would survive, but many failed. lose. “The stories are unraveling,” Kirsch told CNN Business.
The fates of two electric vehicle companies, Nikola and Lordstown Motors, are likely to get worse in 2020 and 2021, respectively, following significant reports alleging misconduct and inappropriateness from the first company. from Hindenburg Research. U.S. electric vehicle companies aren’t the only ones experiencing a drop in valuations. China’s electric vehicle startups are seeing a similar situation. Nio’s shares are down 49% this year, while X-Peng’s is down 52% and BYD’s is down 17%. Even the world’s most valuable carmaker, Tesla, is not immune to the situation as its stock is down 27% this year.
Kirsch sees the drop in share prices of companies that want to compete with Tesla as proof of how difficult it is to turn startups that inspire investors into a proven business. success on paper by revenue and profit.
“Some of these companies are being exposed in some way,” says Kirsch. “There’s a saying that goes like this: When the tide goes out, you’ll see who’s not wearing a bathing suit.”
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