Commercial electric vehicle maker Electric Last Mile Solutions said on Monday it would file for bankruptcy, the first in a series of struggling electric vehicle makers SPACs to file for bankruptcy.
Electric Last Mile Solutions, which went public in June 2021 through a $1.4 billion merger with Forum Merger III, plans to liquidate through a Chapter 7 bankruptcy process, according to a deposit with the United States Securities and Exchange Commission. The company, which was developing a commercial electric vehicle called Urban Delivery, has been under investigation by the SEC since March.
“Unfortunately, there were too many hurdles to overcome in the short time we had,” Shauna McIntyre, CEO and interim president, said in a statement.
The bankruptcy announcement comes three weeks after the company warned it was at risk of running out of cash, and less than a year after launching on the Nasdaq by merging with a special-purpose acquisition company, instead to take the more rigorous route required of a traditional IPO.
Allowing pre-revenue startups to take a shortcut to an IPO before selling a single vehicle has caused problems on many fronts. In addition to Electric Last Mile Solutions, other electric vehicle manufacturers that have merged with a SPAC in the past two years – including Faraday Future, Lordstown Motors, Lucid Motors, Nikola and Canoo – have come under scrutiny. SEC investigations, Nasdaq delistings, executive resignations, and other delays and roadblocks in their journeys to bring a vehicle to market.
The SEC is currently reviewing guidelines to put SPACs on a par with companies pursuing a traditional IPO and expects to finalize new guidelines in the second half of 2022. Meanwhile, some market participants, including Goldman Sachs, Credit Suisse and Citigroup, have suspended or limited trading. Of the approximately 600 SPACs currently looking for a business to acquire, some transactions have been halted or abandoned, PSPC Research.
By all accounts, it’s been a tough year for Electric Last Mile Solutions.
The company’s two top executives, Chairman and CEO James Taylor and Chairman Jason Luo, resigned in February after an internal investigation found they had purchased shares of the company at substantial discounts before the merger of the company. The SEC announced its own investigation into Electric Last Mile Solutions soon after, sending its shares plummeting below $1. The company laid off nearly a quarter of its workforce to cut costs and withdrew its guidance for the rest of 2022.
In May, Electric Last Mile Solutions said it was also at risk of disbarment due to delays in filing its 2021 annual report and first quarter 2022 financial report. The company blamed the delay on its former firm. BDO accountant, whom she accused of helping Taylor and Luo devise the discounted stock purchase plan before the merger. Electric Last Mile Solutions has been without an auditor since the public feud, a longer gap than any other public company.
“It is extremely frustrating that we have to go down this path,” said Brian Krzanich, Chairman of the Board of the Company and former CEO of Intel, “but it was the only responsible next step for our shareholders, partners, creditors and employees”.