The past couple of months for Electric Last Mile Solutions (ELMS) could certainly be described as a horror movie. The tumultuous stretch kicked off in February with a pair of resignations from ex-CEO James Taylor and ex-Chairman Jason Luo, following a board investigation that revealed the two had purchased heavily discounted shares of company stock pre-SPAC merger.
So far in March, things haven’t improved for ELMS. At the beginning of the month, the company announced that it would be laying off almost a quarter of its workforce, or 50 employees, in order to “streamline its cost structure” for its core business, according to a Securities and Exchange Commission filing.
Now, Freddy Krueger himself is clawing at the company’s door.
After the market close on Friday, ELMS delivered the worrying but perhaps unsurprising news that the SEC had launched a probe into the company’s removal of Taylor and Luo, as well as its ability to deliver on promises made to investors. The company has withdrawn all previously issued guidance.
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ELMS last week told the SEC in a Form 8-K that it would only be able to maintain liquidity through sometime between July and September, revealing some major cash concerns. As a result, the company pulled all prior guidance and business outlook and announced that it would be pushing back production of its flagship Urban Delivery vehicle until the end of 2022, at the earliest.
ELMS stock (NASDAQ: ELMS) is down a frightening 37% in the early hours of trading on Monday, the largest drop since the news of Taylor and Luo’s ousting.
“The company intends to cooperate fully with the SEC investigation,” ELMS said in the SEC filing last week. “At this point, the company cannot predict the eventual scope, duration or outcome of this matter.”
ELMS bills its Urban Delivery vehicle as “the first Class 1 electric delivery van in the U.S.,” designed to minimize carbon emissions and maintenance costs for the driver. According to the company, the van has a range of up to 110 miles with 157 cubic feet of cargo space and a maximum payload of more than 1 ton.
Previously, ELMS disclosed that it had successfully launched the vehicle and expected certified Urban Delivery vans to be ready for sale by the end of 2021, but last week’s SEC filing walked those statements back. ELMS also said it would be delaying production of its Urban Utility trucks until the first half of 2023.
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“The operational processes planned by the company’s new leadership around certification and safety testing, vehicle durability testing and other preproduction steps are causing delays in the commercialization time frame for Urban Delivery, Urban Utility and other vehicles,” ELMS revealed in the Form 8-K. “Management is committed to working closely with its commercial partners to produce quality vehicles that meet appropriate safety standards and will only sell vehicles if and when such standards are met.”
Analysts at Cowen anticipate a stock sell-off in the region of 40% to 60%, expecting the stock will bottom out somewhere between 75 cents and $1.15 per share, held up by the value coming from its production plant in Mishawaka, Indiana.
Cowen foresees little value coming from the company’s actual van platform, viewing ELMS as more of an integrator than a manufacturer given regulatory headwinds and challenges in procurement. Analysts caution that the company could struggle to secure FMVSS certification for its Class 1 vans and Class 3 trucks and warn of rising shipping costs for components from China, where the company gets most of its parts.
However, the firm speculates that ELMS could be acquired by another company in the commercial EV or passenger car space on the value of its Mishawaka facility alone.
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