From SPAC merger to Chapter 7 bankruptcy in 12 months. It was quick! Congratulations for the speed and for being the first!
By Wolf Richter for WOLF STREET.
Electric Last Mile Solutions, an EV startup that went public in June 2021 via a merger with a SPAC, was featured on May 30 in my article on SPAC EVs and IPOs Already Announcing They’re Running Out of Money . At the time, the company said its cash would only last “until June.”
I wrote – because you just have to keep your sense of humor about these shenanigans – that “Electric Last Mile has the unique opportunity to be the first SPAC EV of this cycle to go zero because his money-burning machine ran out of money. No hard feelings, folks, that’s how the game is played during bubbles, and someone always manages to hold the bag.
OK, so now it’s “June,” and here’s the SEC filing regarding the company’s decision to file for Chapter 7 bankruptcy. Chapter 7 covers liquidation, not restructuring. It is the end. This means that the company’s assets, if any, are sold to the highest bidder, and the lawyers and some creditors will get the proceeds, if any, and the shareholders can hold the bag and get nothing. Thus, the company said in the SEC filing:
“On June 12, 2022, following a thorough review with the assistance of the Company’s external advisors and on the recommendation of the Company’s management, the Board of Directors determined that it was in the best interest of the Company and its shareholders, stakeholders, creditors, and other interested parties to commence the Chapter 7 case. The Company is currently completing preparations for the Chapter 7 case.
“After the Chapter 7 case commences, a Chapter 7 trustee will be appointed by the bankruptcy court to administer the assets of the company and perform the duties set forth in section 704 of the code.”
As of the news, the stock [ELMS] kathoomphed 62% today, from almost nothing to almost nothing, at $0.20 per share, from $0.51 on Friday. That’s down 98% from the June 28, 2021 high (data via YCharts):
This stock will be delisted from the Nasdaq and then traded over-the-counter where some jockeys will bounce it for a while, only to be dumped and die. Ultimate shareholders – all outstanding shares are still owned by whoever, and those whoever end up with worthless shares in their brokerage account that they can’t sell and will have to watch for years, unless they contact their broker and ask them to delete the shares manually.
So this is the first of many titles in my Implosed Stocks column that will die. From SPAC merger to Chapter 7 bankruptcy in 12 months. It was quick! Congratulations for the speed and for being the first!
The company, which worked on urban delivery vehicles, did not file its annual 10-K report with the SEC, and it did not file its quarterly 10-Q report with the SEC. The company’s auditors withdrew in February. It was also when CEO James Taylor and Chairman Jason Luo, both co-founders, were kicked out after an internal investigation. And it’s under investigation by the SEC.
It’s a mess even for class action lawyers, as they can no longer negotiate a settlement with the company to pay their fees, but will have to fight for crumbs in bankruptcy court. And good luck with that.
I doubt anyone on Wall Street – or any of the celebrities who have promoted all sorts of SPACs – will go to jail for these pump and dump meltdowns. That’s not how it happens. But people are being sued, even celebrities. And many people will end up losing a lot of money. And many more companies will follow Electric Last Mile through bankruptcy court as their stocks drop to zero and the majestic bubble of everything unfolds.
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