British electric vehicle (EV) company Arrival (NASDAQ:ARVL) terminated a special purpose acquisition company (SPAC) merger, agreed to in April and said it will seek other financing opportunities. ARVL stock is down over 6% in early trading.
Arrival had agreed to a merger with Kensington Capital Acquisition Corp V (NYSE:KCGI) in April. (Kensington now trades at $10.56 per share.) The deal would have brought in $238 million in needed cash. Arrival said it has hired TD Cowen and Teneo Financial Advisory to seek other financial arrangements.
ARVL stock was trading this morning at about $2.59 per share, a market capitalization of just $41 million. It executed a 1-for-50 reverse stock split in April. Shares are down 65% in 2023.
Delayed Arrival Time
Arrival has been working on a delivery van called the Arrival XL. It signed a deal to deliver 10,000 vans to United Parcel Service (NYSE:UPS) in 2020. The plan at the time was to deliver the vans by 2024 and possibly double the order.
The company claims it can assemble vehicles using low-capital, small-footprint “microfactories” for less than rivals, achieving profitability from just a few thousand units. It says its vans can be easily repaired and recycled.
But Arrival has been burning through cash without delivering product. It had just $130 million in cash at the end of March and will not deliver second-quarter results until August. The bad news has brought in short sellers, and short squeezes have been the best news in the stock this year.
When the Kensington deal was announced, CEO Igor Torgov, who replaced founder Dennis Sverdlov in January, called the money essential for meeting Arrival’s production goals.
Shares rose sharply after the Kensington announcement.
Arrival first came public in 2021 through a SPAC merger with CIIG Merger, valued at $5.4 billion. But it repeatedly delayed production, pivoted, changed its focus, and restructured, burning through most of the cash. The Kensington deal valued Arrival at one-tenth what it was worth in its first initial public offering (IPO).
ARVL Stock: What Happens Next?
There’s an ongoing shakeout in the EV sector. Companies that show they can scale production and obtain capital are rising. Those that aren’t are failing. Arrival seems to be in the latter category.
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As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
