We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The Zacks Analyst Blog Highlights Lordstown Motors, Canoo, Nikola, Fisker and Lucid Group
Read MoreHide Full Article
For Immediate Release
Chicago, IL – June 30, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Lordstown Motors , Canoo (GOEV - Free Report) , Nikola Corp (NKLA - Free Report) , Fisker and Lucid Group (LCID - Free Report) .
Here are highlights from Thursday’s Analyst Blog:
EV SPAC Frenzy Fizzles as Startups Begin to Fall
The electric vehicle (EV) special purpose acquisition companies (SPAC) frenzy that swept through 2020 and 2021 has come crashing down, dashing hopes of investors. During this period, SPACs turned out to be the most popular course of action for EV startups to go public, helping them to avoid the complexity and strenuous paperwork associated with the traditional initial public offering (IPO). But, in 2022, EV SPAC deals slowed as investors were let down by the missed deadlines, unmet milestones and meager profits of the startups.
Investigations by the Securities and Exchange Commission (SEC) have made it difficult for these EV startups to secure funding, resulting in SPAC financing losing its allure. The first major blow to the market came with Electric Last Mile Solutions, which declared bankruptcy in June 2022, approximately a year after its IPO debut. The company's accounting practices and apparent absence of an auditor drew scrutiny from the SEC.
After a grueling 2022, skepticism among investors is rising as EV startups tread on thin financial ice, facing the make-or-break challenge of proving their mettle in a fiercely competitive market.
Lordstown Files for Bankruptcy
In a telling sign that the SPAC mania is over and EV startups are facing a tough time, U.S. electric truck manufacturer Lordstown Motors filed for bankruptcy on Tuesday. Moreover, the Chapter 11 bankruptcy, typically intended to facilitate business reorganization, took an unexpected turn as the company seeks to sell its Endurance truck assets. This raises doubts about what will remain of RIDE once the process concludes, signaling a potential conclusion to the Lordstown saga.
Lordstown made its Nasdaq debut on Oct 26, 2020, after completing a reverse merger with DiamondPeak Holdings.
Two years ago, the company warned that it might have to shut down due to dwindling funds. Last November, Lordstown inked a deal with Foxconn, the world’s largest contract manufacturer for electronics, per which the latter agreed to invest up to $170 million in Lordstown to aid the production of RIDE’s debut EV truck model, Endurance.
The company received a delisting notice from Nasdaq in April 2023 as its share price fell below $1 a few months prior and failed to rebound. The delisting warning prompted Foxconn to waver and it threatened Lordstown to withdraw from the agreement unless the stock listing predicament was resolved.
Last month, Lordstown raised concerns over an ongoing dispute with Foxconn about the planned investment and the uncertainty of Foxconn fulfilling its funding obligations per the deal. Early this month, Lordstown admitted there was "substantial doubt regarding our ability to continue as a going concern” in the light of insufficient cash to fund the production and sale of its much-anticipated Endurance pickup.
And now, besides filing for bankruptcy, Lordstown Motors has sued Foxconn for fraud and failure to meet its commercial and financial commitments. Lordstown alleges that Foxconn's actions have caused significant damage to the company and its prospects.
Irrespective of Lordstown's outcome after the bankruptcy proceedings, the filing serves as a reminder that, despite the surge of EV startups, the process of establishing an automaker from scratch and successfully launching a car to market is exceedingly challenging.
And this brings us to some crucial questions. What lies ahead for other financially strained EV startups? Is the Lordstown story merely the start of a wave of bankruptcy filings, or will these companies manage to meet their deadlines and succeed?
The Cash-Burning Dilemma of EV Startups
Canoo made its Nasdaq debut on Dec 22, 2020 by merging with Hennessy Capital Acquisition. Year to date, shares of Canoo have tanked more than 65%. This pre-revenue company is struggling with cash drain. In the last reported quarter, the company’s total costs and operating expenses were more than $81 million. If we compare this with its cash situation, the company ended the March 2023 quarter with $6.7 million worth of cash and cash equivalents, sharply down from $36.5 million recorded as of Mar 31, 2022.
Canoo faces the daunting task of raising funds, made even more challenging by a stark decline in its stock value this year. That, coupled with the financial setback caused by SVB's failure, has significantly tightened conditions, making subsequent capital raises increasingly difficult and casting doubt on Canoo's future.
Electric truck upstart Nikola Corp went public on Nasdaq after a reverse merger with VectoIQ on Jun 3, 2020. Once dubbed as the "Tesla of trucking," the hype over the stock has crashed drastically, leaving investors in a sad state. The company incurred a net loss of $784 million in 2022, wider than $690 million in 2021 as elevated manufacturing costs and supply bottlenecks hurt the company, especially when surging inflation hit demand. What spooked investors even more was the going concern warning by the company.
In its 10-K SEC filing for 2022, Nikola said it may not have enough money to stay afloat in business a year from now. In the last reported quarter, the company’s cash/cash equivalents declined to $121 million from $233 million recorded as of 2022 end. Even if the company manages to raise sufficient capital to make it into 2024, shareholders will suffer from outsized dilution. Despite the cash injection, management has much to do to balance its massive cash burn against its existing funds. Year to date, the stock has declined 46%.
Fisker made its NYSE debut on Oct 30, 2020 via a merger with Spartan Energy Acquisition. In the last reported quarter, FSR incurred a quarterly loss of 38 cents per share, wider than the Zacks Consensus Estimate of a loss of 28 cents. It posted revenues of $0.2 million for the quarter ended March 2023, missing the Zacks Consensus Estimate by 98.85%. Moreover, the company cut its production target for 2023. It now plans to produce 32,000-36,000 vehicles, down from the prior forecast of 42,400 units.
To investors’ dismay and as with most EV startups, Fisker's cash reserves have been dwindling. At the end of first-quarter 2023, the company held $652.5 million in cash and cash equivalents, down from $736.5 million as of 2022 end. However, the longevity of this funding— crucial for this production-driven business— is shrouded in ambiguity given the fact that the company is in a nascent stage and is grappling with high manufacturing and operating expenses amid low revenues. Year to date, FSR shares have declined 28%.
Lucid Group went public on Jul 26, 2021 after the EV maker completed its merger with a blank-check company backed by Wall Street dealmaker Michael Klein. In the last reported quarter, LCID incurred a quarterly loss 43 cents per share, wider than the Zacks Consensus Estimate of a loss of 39 cents as well as the year-ago loss of 5 cents per share.
Investor sentiment in the stock has taken a blow due to poor execution, underwhelming production and deliveries, escalating costs, and a significant cash burn rate. The company generated $149.4 million in revenues in the first quarter of 2023, down from $257.7 million in the December 2022 quarter. Moreover, Lucid's total cost and operating expenses surged more than 40% to $921.6 million in the last reported quarter.
The company's cash reserves also experienced a sharp decline, plummeting from $1.7 billion at the end of 2022 to $900 million as of Mar 31, 2023. The substantial increase in net loss to nearly $780 million in the first quarter from $473 million in the fourth quarter of 2022 further underscores Lucid's rapid cash burn rate. With each passing quarter, maintaining confidence in the stock is becoming increasingly challenging. In light of Lucid’s financial struggles, the company is faced with the imperative task of selling a substantial number of vehicles to ensure its viability as a "going concern."
Last year, EV startup Arrival witnessed a staggering 90% decline in its stock price. In November 2022, it expressed concerns about its financial sustainability throughout 2023. The company took drastic measures in January 2023 by reducing its workforce by 50%. In the first quarter of 2023, Arrival's cash balance was $130 million, significantly lower than the $330 million it held in the third quarter of 2022 when it warned of a potential cash shortage by the third quarter of 2023.
In the span between the fourth quarter of 2022 and the first quarter of 2023, Arrival witnessed a depletion of $75 million in cash. Unless an urgent injection of funds is arranged, Arrival's cash reserves will soon be completely wiped out, compelling the company to seek a lifeline of financial support.
Final Thoughts
After taking a shortcut to an IPO through SPAC mergers, most EV startups have been investigated for potentially misleading investors with unrealistic projections. This has resulted in diminishing cash reserves, putting immense pressure on startups that are struggling to scale up production while facing limited funding options in a turbulent economic environment.
Moreover, the drop in valuations has made selling equity for much-needed cash less effective, leaving investors dissatisfied with the dilution of their stake, especially as established players like Ford, General Motors and others enter the EV space.
The road ahead remains uncertain for EV SPACs, with the need for sustained funding and doubts over their ability to deliver on promises. The current year is going to be crucial for EV startups as they walk a financial tightrope.
Amid the challenges, companies that can beat financial hurdles and manage to stand out from the crowd will shine. Self-funded companies with scale and cost leadership stand a better chance of success. Thriving in this evolving EV market will require resilience, innovation and effective capital management.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
The Zacks Analyst Blog Highlights Lordstown Motors, Canoo, Nikola, Fisker and Lucid Group
For Immediate Release
Chicago, IL – June 30, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Lordstown Motors , Canoo (GOEV - Free Report) , Nikola Corp (NKLA - Free Report) , Fisker and Lucid Group (LCID - Free Report) .
Here are highlights from Thursday’s Analyst Blog:
EV SPAC Frenzy Fizzles as Startups Begin to Fall
The electric vehicle (EV) special purpose acquisition companies (SPAC) frenzy that swept through 2020 and 2021 has come crashing down, dashing hopes of investors. During this period, SPACs turned out to be the most popular course of action for EV startups to go public, helping them to avoid the complexity and strenuous paperwork associated with the traditional initial public offering (IPO). But, in 2022, EV SPAC deals slowed as investors were let down by the missed deadlines, unmet milestones and meager profits of the startups.
Investigations by the Securities and Exchange Commission (SEC) have made it difficult for these EV startups to secure funding, resulting in SPAC financing losing its allure. The first major blow to the market came with Electric Last Mile Solutions, which declared bankruptcy in June 2022, approximately a year after its IPO debut. The company's accounting practices and apparent absence of an auditor drew scrutiny from the SEC.
After a grueling 2022, skepticism among investors is rising as EV startups tread on thin financial ice, facing the make-or-break challenge of proving their mettle in a fiercely competitive market.
Lordstown Files for Bankruptcy
In a telling sign that the SPAC mania is over and EV startups are facing a tough time, U.S. electric truck manufacturer Lordstown Motors filed for bankruptcy on Tuesday. Moreover, the Chapter 11 bankruptcy, typically intended to facilitate business reorganization, took an unexpected turn as the company seeks to sell its Endurance truck assets. This raises doubts about what will remain of RIDE once the process concludes, signaling a potential conclusion to the Lordstown saga.
Lordstown made its Nasdaq debut on Oct 26, 2020, after completing a reverse merger with DiamondPeak Holdings.
Two years ago, the company warned that it might have to shut down due to dwindling funds. Last November, Lordstown inked a deal with Foxconn, the world’s largest contract manufacturer for electronics, per which the latter agreed to invest up to $170 million in Lordstown to aid the production of RIDE’s debut EV truck model, Endurance.
The company received a delisting notice from Nasdaq in April 2023 as its share price fell below $1 a few months prior and failed to rebound. The delisting warning prompted Foxconn to waver and it threatened Lordstown to withdraw from the agreement unless the stock listing predicament was resolved.
Last month, Lordstown raised concerns over an ongoing dispute with Foxconn about the planned investment and the uncertainty of Foxconn fulfilling its funding obligations per the deal. Early this month, Lordstown admitted there was "substantial doubt regarding our ability to continue as a going concern” in the light of insufficient cash to fund the production and sale of its much-anticipated Endurance pickup.
And now, besides filing for bankruptcy, Lordstown Motors has sued Foxconn for fraud and failure to meet its commercial and financial commitments. Lordstown alleges that Foxconn's actions have caused significant damage to the company and its prospects.
Irrespective of Lordstown's outcome after the bankruptcy proceedings, the filing serves as a reminder that, despite the surge of EV startups, the process of establishing an automaker from scratch and successfully launching a car to market is exceedingly challenging.
And this brings us to some crucial questions. What lies ahead for other financially strained EV startups? Is the Lordstown story merely the start of a wave of bankruptcy filings, or will these companies manage to meet their deadlines and succeed?
The Cash-Burning Dilemma of EV Startups
Canoo made its Nasdaq debut on Dec 22, 2020 by merging with Hennessy Capital Acquisition. Year to date, shares of Canoo have tanked more than 65%. This pre-revenue company is struggling with cash drain. In the last reported quarter, the company’s total costs and operating expenses were more than $81 million. If we compare this with its cash situation, the company ended the March 2023 quarter with $6.7 million worth of cash and cash equivalents, sharply down from $36.5 million recorded as of Mar 31, 2022.
Canoo faces the daunting task of raising funds, made even more challenging by a stark decline in its stock value this year. That, coupled with the financial setback caused by SVB's failure, has significantly tightened conditions, making subsequent capital raises increasingly difficult and casting doubt on Canoo's future.
Electric truck upstart Nikola Corp went public on Nasdaq after a reverse merger with VectoIQ on Jun 3, 2020. Once dubbed as the "Tesla of trucking," the hype over the stock has crashed drastically, leaving investors in a sad state. The company incurred a net loss of $784 million in 2022, wider than $690 million in 2021 as elevated manufacturing costs and supply bottlenecks hurt the company, especially when surging inflation hit demand. What spooked investors even more was the going concern warning by the company.
In its 10-K SEC filing for 2022, Nikola said it may not have enough money to stay afloat in business a year from now. In the last reported quarter, the company’s cash/cash equivalents declined to $121 million from $233 million recorded as of 2022 end. Even if the company manages to raise sufficient capital to make it into 2024, shareholders will suffer from outsized dilution. Despite the cash injection, management has much to do to balance its massive cash burn against its existing funds. Year to date, the stock has declined 46%.
Fisker made its NYSE debut on Oct 30, 2020 via a merger with Spartan Energy Acquisition. In the last reported quarter, FSR incurred a quarterly loss of 38 cents per share, wider than the Zacks Consensus Estimate of a loss of 28 cents. It posted revenues of $0.2 million for the quarter ended March 2023, missing the Zacks Consensus Estimate by 98.85%. Moreover, the company cut its production target for 2023. It now plans to produce 32,000-36,000 vehicles, down from the prior forecast of 42,400 units.
To investors’ dismay and as with most EV startups, Fisker's cash reserves have been dwindling. At the end of first-quarter 2023, the company held $652.5 million in cash and cash equivalents, down from $736.5 million as of 2022 end. However, the longevity of this funding— crucial for this production-driven business— is shrouded in ambiguity given the fact that the company is in a nascent stage and is grappling with high manufacturing and operating expenses amid low revenues. Year to date, FSR shares have declined 28%.
Lucid Group went public on Jul 26, 2021 after the EV maker completed its merger with a blank-check company backed by Wall Street dealmaker Michael Klein. In the last reported quarter, LCID incurred a quarterly loss 43 cents per share, wider than the Zacks Consensus Estimate of a loss of 39 cents as well as the year-ago loss of 5 cents per share.
Investor sentiment in the stock has taken a blow due to poor execution, underwhelming production and deliveries, escalating costs, and a significant cash burn rate. The company generated $149.4 million in revenues in the first quarter of 2023, down from $257.7 million in the December 2022 quarter. Moreover, Lucid's total cost and operating expenses surged more than 40% to $921.6 million in the last reported quarter.
The company's cash reserves also experienced a sharp decline, plummeting from $1.7 billion at the end of 2022 to $900 million as of Mar 31, 2023. The substantial increase in net loss to nearly $780 million in the first quarter from $473 million in the fourth quarter of 2022 further underscores Lucid's rapid cash burn rate. With each passing quarter, maintaining confidence in the stock is becoming increasingly challenging. In light of Lucid’s financial struggles, the company is faced with the imperative task of selling a substantial number of vehicles to ensure its viability as a "going concern."
LCID currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Last year, EV startup Arrival witnessed a staggering 90% decline in its stock price. In November 2022, it expressed concerns about its financial sustainability throughout 2023. The company took drastic measures in January 2023 by reducing its workforce by 50%. In the first quarter of 2023, Arrival's cash balance was $130 million, significantly lower than the $330 million it held in the third quarter of 2022 when it warned of a potential cash shortage by the third quarter of 2023.
In the span between the fourth quarter of 2022 and the first quarter of 2023, Arrival witnessed a depletion of $75 million in cash. Unless an urgent injection of funds is arranged, Arrival's cash reserves will soon be completely wiped out, compelling the company to seek a lifeline of financial support.
Final Thoughts
After taking a shortcut to an IPO through SPAC mergers, most EV startups have been investigated for potentially misleading investors with unrealistic projections. This has resulted in diminishing cash reserves, putting immense pressure on startups that are struggling to scale up production while facing limited funding options in a turbulent economic environment.
Moreover, the drop in valuations has made selling equity for much-needed cash less effective, leaving investors dissatisfied with the dilution of their stake, especially as established players like Ford, General Motors and others enter the EV space.
The road ahead remains uncertain for EV SPACs, with the need for sustained funding and doubts over their ability to deliver on promises. The current year is going to be crucial for EV startups as they walk a financial tightrope.
Amid the challenges, companies that can beat financial hurdles and manage to stand out from the crowd will shine. Self-funded companies with scale and cost leadership stand a better chance of success. Thriving in this evolving EV market will require resilience, innovation and effective capital management.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.