Five EV Startups lose over $40 billion after merger with SPACs for public listing

In a disturbing situation, five electric vehicle startups that went public through mergers with special purpose acquisition companies (SPACS) have lost billions of dollars in market capitalization.

During their high, the EV firms, Nikola Corp., Fisker Inc., Lordstown Motors Corp., Canoo Inc., and Arrival Ltd. were valued at $60 billion combined. They have since lost $40 billion of market capitalization.

Three of the companies slumped to new lows this week facing short-seller attacks management turmoil and delivery issues, prompting investors to reconsider their prospects.

Unlike the traditional public initial offering, going public via SPACs allows companies to make future projections during their listings to keep investors hooked in EV firms. However, all these companies have yet to deliver their first vehicles to customers.

Here are the detailed happenings at each company:

Nikola

Founder Trevor Milton gained popularity last year with his claims to oust Tesla’s Elon Musk. Days after Nikola, a battery-electric and hydrogen-powered truck maker, debuted on the Nasdaq in June, it was worth almost $29 billion, rivaling Ford Motor Co. at the time.

However, owing to multiple investigations on Nikola CEO's exaggerated claims regarding the capability of its first truck, Milton had to resign and the company’s shared nosedived briskly. The shares have recovered somewhat since dipping below $10 in April.

Fisker

Founded by long-time auto designer Henrik Fisker, the company announced its reverse merger a month after Nikola’s listing. It was worth $8 billion in February, but the tides turned and investors went bullish on Fisker’s EV prospects. The company’s net worth was below $3 billion earlier this week. However, the shares made a slight recovery later when it announced an EV with Foxconn Technology Group and build it in the US.

Lordstown Motors

Lordstown’s fate was similar to that of Nikola’s. It was founded on tall claims boosted by the former US government backing. The then-Vice President Mike Pence even attended the launch of its Endurance work truck in June at the factory the company took over from General Motors Co. About six weeks later, Lordstown found a SPAC partner.

However, Hindenburg Research once again published a detailed report, blaming that Lordstown misled investors, prompting an investigation by SEC. The company is now worth $1.2 billion, less than a quarter of what it was worth in mid-February.

Canoo

A couple of former BMW AG executives launched the startup, unveiling a seven-seat prototype in 2019. The company then entered a deal with Hyundai Motor to develop EVs before going public in August.

Then in January, Canoo officials also met with Apple Inc. about their car ambitions. The momentum was soon broken due to the company’s faulty business plan.

In March this year, Canoo decided to shift its emphasis from engineering services for other companies and the subscription business model that was part of its original pitch to investors. It fired top executives, including the chief financial officer. Last month, one of its co-founders resigned from the CEO post.

Arrival

Arrival enjoyed the backing of big names, i.e. BlackRock Inc., Hyundai, and United Parcel Service Inc. when it announced to build electric vans and buses in so-called micro-factories. The British startup even partnered with Uber Technologies Inc. to develop an EV that’s purpose-built for ride-hailing.

Despite these gains on the investment front, Arrival shares haven’t sustained the immediate gain following that announcement. The company’s valuation is the highest among the five at $10.5 billion.