The EV SPACs are running out of juice

The EV SPACs are running out of juice

How many squeezes are left?

EV SPAC land is looking as bleak as ever with a pair of filings in the past week showing that money is increasingly hard to come by. Without more capital, we may see a new pileup of crashed electric vehicle companies, so this news is concerning.

First up is Arrival. The company’s latest financial life line — a term loan facility — has been quickly quashed, leaving it with few options to continue operations.

We last heard from the U.K.-based commercial EV company back in July 2023 after it ended a deal to merge with a special purpose acquisition company (SPAC). Yes, that’s right, the company that went public via a merger with a SPAC was going to merge with a second blank-check company called Kensington Capital Acquisition Corp. in a bid to avoid bankruptcy. The SPAC with Kensington had a pro forma enterprise value of $524 million.

That deal was called off in July, mere weeks after it was first announced.

A dash for cash

Why was Arrival so strapped for cash to pursue a second SPAC deal? And why did it come back into the news this week for financing-related disclosures? It lost too much money, for too long, and was too far from having material revenues.

In numerical terms, Arrival told investors that it closed 2022 with $205 million worth of cash on hand. Not bad, but the company had burned through $126 million (negative operating cash flow) in the fourth quarter of last year. The company torched less cash in Q1 2023 — a comparatively modest $75 million — but that took it down to just $130 million in cash on hand at the end of the first quarter.

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