Instead of going public through the traditional route, many companies have opted to go public in the US through a “special purpose acquisition company” (SPAC), also known as a blank check company, which is a publicly traded shell company that serves as a vehicle for a private company to go public. Merging with a SPAC allows companies to go public in the US without having to raise a significant amount of capital from investors.
This is the most popular way for electric vehicle startups to go public without having to go through the complicated procedures of a conventional IPO. After many years of existence, this method has become a fever in 2020-2021.
In 2020, nearly 10 electric vehicle companies went public through SPACs, some of which reached multi-billion dollar valuations. However, in 2022, the market began to cool down as electric vehicle companies failed to perform as expected.
After a grueling year, many startups have been unable to withstand the fierce competition in the market. Most recently, US electric truck manufacturer Lordstown filed for bankruptcy at the end of June.
Lordstown debuted on Nasdaq on October 26, 2020, after completing its merger with DiamondPeak Holdings. However, just a year later, the company warned that it might have to close due to lack of capital.
Lordstown was delisted from the Nasdaq in April 2023 after its stock price fell below $1 a few months earlier and failed to recover.
Another company on the brink is US electric truck startup Nikola, which listed on Nasdaq after merging with VectoIQ on June 3, 2020. The company was once dubbed the “Tesla of trucking” after its stock hit $94 a share shortly after its IPO.
However, the electric truck maker has suffered a net loss of $784 million in 2022 and $690 million in 2021 due to rising production costs and supply disruptions.
The company's cash reserves fell to $121 million in the second quarter, down from $233 million at the end of 2022. Nikola shares have fallen 46% year to date.
Lordstown has received thousands of pre-orders for the Endurance truck. Photo: Electrek
Another example of an electric vehicle startup that failed after going public via a SPAC is Arrival, a UK-based company that went public in March 2021 through a merger with CIIG Merger in a deal worth $5.4 billion.
Last year, Arrival’s stock fell a record 90%. In November 2022, the company expressed concerns about its financial performance in 2023. The company took drastic measures, including cutting 75% of its workforce to conserve cash. 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.
In an effort to avoid bankruptcy, Arrival said in April 2023 that it had reached an agreement to merge with a second SPAC called Kensington Capital. The company said it intended to “refocus on advancing other opportunities . ”
Nguyen Tuyet (According to Yahoo! Finance, News Observer, Barron's)
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