January 21, 2022


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SPAC: electric car start-ups flop on the stock market

Some stock market investors have already noticed that buying shares in the “pure players” of the electric car does not necessarily lead to paradise. Alongside the magical valuations of Rivian or Lucid, which soared to tens of billions of dollars in the wake of comet Tesla, the battery car also has real stock market “flops”, and some great disappointments.

The best known are Nikola and Lordstown, whose share prices have plummeted by more than 80% since their peaks in 2020. The first, which made investors dream with its electric and hydrogen trucks when it entered Wall Street in June 2020, melted three months later, when a research bureau accused its founder, Trevor Milton of fraud, even causing his resignation.

Overpriced pre-orders

Having reached nearly $ 80 after its introduction, the stock fell to $ 18 in October 2020, and is only worth around $ 10 today. If the startup of Phoenix, Arizona, is not dead (its new leaders still plan to deliver 25 trucks by the end of 2021), its valuation has fallen to $ 4 billion, far from the 30 billion reached in June 2020.

The story of Lordstown Motors is similar. The electric pickup maker, which raised 700 million euros when it was introduced with fanfare in October 2020, saw its price climb to $ 27 in February, before plummeting to less than $ 5 today , when he admitted that the pre-orders of his Endurance pickup had undoubtedly been overvalued. The management even admitted this summer not to be sure that the company will survive, and has just announced a new delay for the delivery of the first Endurance, postponed to the second half of 2022.

Less spectacular, the stock market mishaps of Canoo (-45% since its peak in December), Fisker (-25% since February), Faraday Future (-60% since January), Arrival (-65% since December) or Electric Last Mile (-43% since December) show that the “jackpot” is far from assured.

For the moment, these young companies are accumulating losses rather than cash. They still have everything to prove. None of them sold a single vehicle and all will probably not survive. But investors have been popular with them for a while, anxious to make up for it after having “missed Tesla”. “However, they do not all have a competitive advantage, that little something unique that will allow them to differentiate themselves,” notes analyst Philippe Houchois, at Jefferies.

SEC investigations

They also have one thing in common: having integrated the quotation via mergers with SPAC (Special Purpose Acquisition Company), those empty shells which raised funds on the stock market with the aim of then merging with companies with a future. “In this case, the projections presented to investors are those of the sponsor, and not of the management of the company: there may be shifts, even unintentional, if the sponsors’ forecasts are too ambitious,” underlines Philippe Houchois.

In this case, it is precisely such shifts that plagued Nikola, Lordstown and Canoo. The three companies, whose leaders have since been replaced, are even today under investigation by the SEC, which seeks to determine if these forecast errors amount to fraud. And Nikola is said to be on the verge of closing a $ 125 million deal with the US Stock Exchange Constable.

Several of these young shoots having merged with PSPC are evolving these days below their introductory course, of 10 dollars: Lordstown Motors, Faraday Future, Arrival, or Electric Last Mile.