If 2020 and 2021 were the years of the SPAC, 2022 is shaping up to be the year of the reprimand.
Nearly all of the electric vehicle manufacturers that took a shortcut to an IPO by merging with a special purpose acquisition company over the last two years are being investigated by the Securities and Exchange Commission. Most of them attracted scrutiny mere months after debuting on the public market for misleading investors with unrealistic projections.
In fact, these companies have proven so difficult to monitor that the SEC in March proposed new rules to instill oversight.
Here is a guide to all of the investigations on EV-SPAC combinations going on right now. We’ll keep this primer updated as the situations develop.
Faraday Future
Faraday Future grabbed everyone’s attention when it revealed its flashy concept at CES 2017, but it has yet to build or deliver a single vehicle five years on. Now, it’s in danger of being delisted from the NASDAQ.
The company went public in July 2021 by merging with SPAC Property Solutions Acquisition in a $3.4 billion deal. Three months later, a report from short-seller J Capital alleged that Faraday misled investors.
The company concluded an internal investigation on April 12 that culminated in the removal of founder and former CEO Yueting Jia as an executive officer and the dismissal or probation of others.
Meanwhile, the SEC has been conducting its own investigation and subpoenaed several executives who may have been involved. Faraday said the investigation has forced the company to delay filing the paperwork necessary to comply with NASDAQ guidelines.
The SEC’s investigation is ongoing.
Lordstown Motors
Electric truck company Lordstown Motors, which also has yet to sell a product or earn revenue, is under investigation by both the SEC and the U.S. Department of Justice for allegedly misleading investors with a falsified book of 100,000 preorders for its pickup truck.
Lordstown went public in October 2020 through a $1.6 billion SPAC merger with DiamondPeak Holdings. Six months later, Hindenburg Research, a New York-based activist short-seller, published a report warning of bogus preorders, such as the $735 million sale of 14,000 trucks to E Squared Energy, a company based out of a small residential apartment in Texas that doesn’t operate a vehicle fleet.
Both investigations remain open.
Nikola
Nikola, a company developing electric and hydrogen electric powertrains for Semi trucks, went public in June 2020 in a $3.3 billion merger with VectolQ. The company quickly made headlines for Its eye-popping $29 billion valuation and co-founder Trevor Milton’s claims that Nikola would challenge the industry’s long-running bestseller, the Ford F-150, and the forthcoming Tesla Cybertruck, with its own EV pickup truck called the Badger.
But four months later, the SEC and the Department of Justice launched an investigation into allegations the company and its founder had defrauded investors with misleading statements about the progress of its commercial Semi truck development, resulting in Milton’s departure.
The SEC said that Milton misled investors on numerous fronts including the company’s technological advancements and production capabilities. Milton was charged with criminal fraud.
The company lost a number of partnerships as a result. GM scrapped its plan to take a equity stake in Nikola and to produce the Badger electric pickup for the company. Nikola also dropped its Powersports unit and refocused its efforts on the production of semi trucks, specifically the Nikola Tre.
In August 2021, Nikola cut its production forecast by 85% and delayed the launch of its first semi truck, the Nikola Tre. The company finally began production on the battery-electric version of the Tre semi truck in March 2022 at its factory in Coolidge, Arizona. The company plans to begin deliveries of the trucks in the second quarter. A hydrogen fuel cell version of the Tre, which is designed for longer routes, is expected to begin shipping in late 2023.
Nikola agreed to pay a $125 million penalty as part of its settlement with the SEC in December 2021.
Lucid Motors
Luxury EV maker Lucid Motors went public in July 2021 through a $4.4 billion deal with SPAC Churchill Capital Corp. IV.
The company, which boasted a $24 billion valuation despite having no revenue, has set itself apart from its peers by bringing its first model, the long-range Lucid Air sedan, to market in November. Less than a month later, federal regulators began an investigation into possible violations of federal securities law.
In February, Lucid shares tumbled on news that the company lowered its 2022 production forecast and needed to delay the launch of its all-electric, seven-passenger Lucid Gravity SUV. The company has since launched another variant of the Lucid Air.
Electric Last Mile
Electric Last Mile went public in June 2021 through a $1.4 billion merger with Forum Merger III.
An internal investigation in February found that CEO James Taylor and Chairman Jason Luo purchased heavily discounted shares of the company stock before the SPAC merger. The ensuing departure of the company’s top two executives sparked an SEC investigation into the executives’ dismissal, as well as the company’s ability to meet forecasts.
Then in March, the company said it would lay off 50 employees — nearly a quarter of its workforce — to cut costs.
NASDAQ said this month that, like Faraday Future, the company could be delisted if it didn’t submit its 2021 annual report on time.
The SEC investigation into Electric Last Mile is ongoing.
Arrival
British EV maker Arrival went public in March 2021 through a $660 million deal with CIIG Merger. Shortly after, it said it needed to postpone production of its battery-electric commercial van and raise more money.
The announcement triggered a class-action lawsuit against the company, which now plans to launch its first vehicle in late 2023.
Canoo
Canoo, an electric vehicle startup founded by two former BMW executives, went public in December 2020 in a $600 million merger with Hennessy IV.
Now, the company is under SEC scrutiny, which it says has forced it to postpone the timeline for its first vehicle by two years. The broad-reaching investigation is looking into the company’s operations, earnings and initial SPAC deal. Canoo has also suffered from a string of lawsuits from investors and internal conflicts that have resulted in the departure of its founding team.
Canoo has had a few wins, though, including a partnership with NASA to transport astronauts, equipment and support personnel to the launchpad for the upcoming Artemis missions to the moon.
The SEC investigation into Canoo remains open.
Mullen
Mullen, another EV company yet to produce a vehicle, went public in a November 2021 merger with Net Element.
Hindenburg Research in April released a report claiming that Mullen misrepresented results of its battery testing as well as a potential joint venture to manufacture its solid-state battery technology.
Law firm Pomerantz LLP is investigating the report’s claims for a potential class-action suit.
