Electric Last Mile Solutions is a Troy, Michigan-based delivery van startup that has been developing its electric van for years before starting production late last year. That’s a milestone for any EV startup in this era of come and go EV companies. But there is a lot going on that raises red flags.
The two top Electric Last Mile founders have left the company
Both the ELMS CEO James Taylor and Chairman Jason Luo left the company this week. The ELMS board says they both purchased equity in the company without any outside oversight to what the equity was worth. With companies like ELMS, which have found funding through blank check SPAC funding, there are many questions about what they represent.
SPAC is short for “special purpose acquisition companies”, which are basically blank check companies giving access to startups to the stock market. It makes it easier and quicker to tsp into investment money than following the traditional path of initial public offerings. Naturally, there is more risk involved than investing in a legitimately-placed company on the stock exchange.
But this clearly smacks of increasing scrutiny of these types of SPAC EV startups. Just yesterday, shares have plunged 50-percent. It is the nature of these types of companies in this environment.
Electric Last Mile shares are down by 50-percent
ELMS went public in June of 2021 with a valuation of $1.4 billion. Since then, its market capitalization is at $336 million. With this latest news, investors will be wary of dumping more into the company until there are numbers that indicate sales are soaring. The “lynchpins” of the company were Taylor and Luo.
The hidden advantage that LMTS possessed was its connection to Chinese manufacturing. “With both gone under dark cloud circumstances, the ELMS bull story is tossed out the window and has minimal credibility in the eyes of investors and puts major uncertainty around the name until more details are known,” said Dan Ives, managing director and senior equity analyst with Wedbush Securities to Automotive News. Wedbush has downgraded the company’s stock.
“This is potentially back-breaking news to the ELMS story”
“With investors already skeptical of many unproven EV startups, this is potentially back-breaking news to the ELMS story, and we clearly cannot stay on board with a positive bias,” Ives continued. It’s not uncommon for executives to get equity in the company they’re heading. But that equity has to be recorded as compensation. This raises red flags about the health of the company.
This has been the legacy of SPACS. With a company going through an IPO review, the bad stuff tends to surface. It has a lot more checks and balances. But a SPAC avoids that scrutiny. That is why there is regulatory oversight in the works.
Fisker, Lucid, Nikola, and Lordstown
Most of the electric vehicle startups rely on SPACs to hoover development capital. That includes Fisker, Lucid, Nikola, and Lordstown. The last two are suffering over numerous claims that can’t be confirmed.
Fisker, on the other hand, is under a microscope as it heads into its promise to begin production of its Ocean SUV later this year. If it can’t meet its goal, look for additional scrutiny. And also, lots of drama from investors and investigators.
Just today, a class-action lawsuit was filed against ELMS for making false and/or misleading statements and/or failing to disclose a litany of charges. Rounding up all of the issues that have surfaced over the last several days, it looks like Electric Last Mile Solutions is in trouble.