Electric Last Mile (ELMS) to Declare Bankruptcy Post Rough Run

Electric Last Mile Solutions ELMS recently announced that it will file for bankruptcy just a year after going public. It is the first among a line of special purpose acquisition company (SPAC) electric vehicle (EV) players to run into trouble and go out of business.

Electric Last Mile Solutions went public in June 2021 through a merger valued at $1.4 billion with Forum Merger III. However, it has been under the scrutiny of the U.S. Securities and Exchange Commission (“SEC”) since March. It now plans to liquidate through a Chapter 7 bankruptcy process.

The company stated that it has faced a number of obstacles, and it became difficult for it to steer clear of those within a short span of time.The bankruptcy announcement comes three weeks after the Electric Last Mile had flagged that it was in danger of running out of cash.

Some of the company’s top brass resigned in February when it came to light that they had purchased equity in the company at substantial discounts before its merger. The SEC investigation that followed thereafter sent its shares plummeting below $1. The company was forced to lay off nearly a quarter of its workforce.

In May, the firm said it ran the risk of being delisted over delays in filing its 2021 annual and first-quarter 2022 financial reports.

Of late pre-revenue startups have been allowed the easier route to an IPO before the sale of a single vehicle, and this has landed them in trouble. Apart from Electric Last Mile Solutions, other EV makers that went public by merging with a SPAC over the last couple of years, like Faraday Future, Lordstown Motors, Lucid Motors and Canoo, have faced SEC investigations and other delays and roadblocks to get a vehicle to market.

The SEC has risen to the problem and is reviewing guidelines to put SPACs on par with companies pursuing a traditional IPO. It expects to come up with new guidelines during the second half of 2022.

Zacks Rank & Key Picks

ELMS carries a Zacks Rank #3 (Hold), currently.

Shares of ELMS have plunged 98% over the past year compared with its industry’s 18.7% decline.

Image Source: Zacks Investment Research

Better-ranked players in the auto space include Wabash National Corporation WNC, sporting a Zacks Rank #1 (Strong Buy) and Fox Factory Holdings FOXF and Standard Motor Products SMP, each carrying a Zacks Rank #2 (Buy) currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Wabash National has an expected earnings growth rate of 239.3% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.

Wabash National’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. WNC pulled off a trailing four-quarter earnings surprise of 51.26%, on average. The stock has declined 9% over the past year.

Fox Factory has an expected earnings growth rate of 14.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised around 1% upward in the past 30 days.

Fox Factory’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. FOXF pulled off a trailing four-quarter earnings surprise of 10.18%, on average. The stock has declined 46.1% over the past year.

Standard Motor has an expected earnings growth rate of 5.2% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised around 3.1% upward in the past 30 days.

Standard Motor’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. SMP pulled off a trailing four-quarter earnings surprise of 40.34%, on average. The stock has declined 14.5% over the past year.

How to Profit from the Hot Electric Vehicle Industry

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.