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EV makers struggle after de-SPAC, Electric Mile files for bankruptcy

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Yahoo Finance Live anchors discuss the first EV SPAC to file to bankruptcy, Electric Last Mile, along with how other EV makers are faring.

Video Transcript

BRAD SMITH: Welcome back to Yahoo Finance Live, everyone. The national average gas price is officially above $5 per gallon. That's according to AAA. Now while higher gas prices may be having some looking at going electric, the current market volatility hasn't spared the EV space either. Let's talk about Electric Last Mile Solutions filing for Chapter 7 bankruptcy, marking the first EV SPAC to go under in the current market downturn. And this is just one part of the broader downturn that we've seen from SPACs that had gone public in that wave of IPOs that came forth in 2021, only for many of those companies who access the capital markets to be rocked in 2022 thus far.

JULIE HYMAN: Yeah, I mean, this Electric Last Mile had its own specific kind of issues. And we should mention, it's not a Chapter 11 bankruptcy. It's a Chapter 7 bankruptcy, which means liquidation. This business is going away. It's not getting bankruptcy protection and sticking around. So that's something to mention.

But also, it has had some issues. This is a company that had been importing some EV parts from China and then assembling them in the United States. The co-founders had stepped down from management of the company earlier in the year because there were some questions about improper stock purchases, just before they announced the SPAC merger. Then they said they were under SEC investigation earlier this year as well. They cut 24% of their workforce in March at that same time. So we already had seen a lot of problems.

But here are the other de-SPAC'd EV makers, right, and what they've done just year to date. So this is not-- this is not necessarily since they de-SPAC'd and actually started trading as their companies. So, obviously, it has been-- the road has been littered with wrecks, can we say?

BRIAN SOZZI: Yeah, I needed a good laugh this morning as I went back to the original investor presentation on Electric Last Miles. And they were projecting to sell close to 20,000 new units this year from nothing in 2020. So that was always going to be a hard sell for investors, just a hard sell to even pull off. And on that 20,000 unit number estimated for this year, which will, obviously, not happen because they're liquidating, they were projecting $613 million in sales and operating profits for the next four years-- ridiculous.

And the lesson here for investors, if they are inclined to play SPACs or look at what's left out there, any time you see these wild projections, you have to throw a red flag onto the field here because none of these targets were going to be achieved in any way, shape, or manner.

And then, secondarily, look, they had some heavy hitters on this board. They had former Intel CEO Brian Krzanich and former longtime UPS CFO Richard Peretz. I've talked to Richard. I'm surprised he would attach his name to this pile of dog poo that is Electric Last Mile. And I'm surprised at Intel, at Brian Krzanich, which, in many respects, he reinvented Intel. To put your name to a company like this and then to see your executives leave for potentially buying stock ahead of the deal, this is-- what a disaster.

BRAD SMITH: Well, every prospectus that we had seen within this landscape was also very much derivative or looking forward in their guidance at how much a policy decision on the infrastructure side would also move forward the broader industry, too. You could argue that cannabis is waiting for the same thing.

Ultimately, in the EV space, there should have been more for them to be able to build up some of these businesses off of, whether it be from Electric Last Mile in delivery or ensuring that you could have a more autonomous fleet that's out there as well. All of these factors considered, yes, it's moving forward, but not nearly at the clip that many of them had predicted would come forward, especially in the span of a year.

BRIAN SOZZI: Yeah, it's unfortunate because there is a market. I really do. I think there is a market for electric vans like this and especially that deliver packages last mile.

JULIE HYMAN: Well, and not only that, if you look again at that list of all the stocks and what they've done, there's obviously a difference between a Nikola and a Lucid. I mean, Lucid is actually going to be selling cars, right? So there are-- so there is a spectrum here. But the market, just like it has with anything that is seen as high growth, high multiple, more risky, selling first, asking questions later.

BRIAN SOZZI: Yeah, I would say out of those two, of course, you have Lucid, which, to your point, is actually making things. So their stuff will actually start to hit the roads. And Polestar, you know, that Polestar SPAC is supposed to-- that's supposed to become a publicly traded company before the end of this month, so another name to watch in the space.