Auto parts supplier Proterra (NASDAQ:PTRA) — which specializes in heavy-duty electric vehicle (EV) components — filed for bankruptcy on Monday. At the ringing of the opening bell on Tuesday, PTRA stock immediately collapsed, hemorrhaging roughly 84% of equity value. Fundamentally, the EV sector may be experiencing growing pains as it wrestles with various headwinds, including slowing demand.
According to a Bloomberg report, Proterra filed a Chapter 11 petition in Delaware. In the disclosure, the Burlingame, California-based enterprise listed assets and liabilities of at least $500 million each. Further, “[t]he filing gives Proterra protection from creditors while it finds a way to repay them.”
Per a corporate statement, management intends to either recapitalize its business units or sell them off. For now, the company will operate as normal by using existing capital to fund its operations.
“While our best-in-class EV and battery technologies have set an industry standard, we have faced various market and macroeconomic headwinds, that have impacted our ability to efficiently scale all of our opportunities simultaneously,” Proterra CEO Gareth Joyce remarked in a statement.
Even before the bankruptcy announcement, PTRA stock struggled. At the start of the year, shares traded near $4 before to tumbling to a little over $1 in March.
PTRA Stock Is the Latest EV Failure
On a broader level, the cratering of PTRA stock presents a worrying sign about the viability of the EV ecosystem. In addition to its core business of developing components like chargers and batteries, Proterra also features a division that manufacturers entire electric-powered buses. Through the end of last year, most of the company’s sales stemmed from selling these buses, per Bloomberg.
Unfortunately, while the concept of electrifying heavy-duty vehicles may have appealed to the public, Proterra continued to print red ink on the bottom line as its top line steadily expanded.
As well, management signaled troubles earlier this year. Per Reuters, the company announced plans for job cuts in addition to previously announced reductions. It also stated that it would combine electric bus and battery production in South Carolina as a cost-trimming measure.
Sadly, PTRA stock represents the latest EV failure. In late June, Lordstown Motors (NASDAQ:RIDE) filed for bankruptcy after a failure to resolve a dispute involving an investment lifeline.
For Proterra, it never quite got a handle on macroeconomic headwinds, particularly procuring critical components amid a fickle demand profile. Also, the massive funding required to scale the business may have proved too much for the company.
Why It Matters
Both Proterra and Lordstown entered the capital market via a reverse merger with a special purpose acquisition company (SPAC). Although SPACs represented a huge source of interest during the early pandemic days, their gross underperformance has now served as a cautionary tale.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Josh Enomoto did not have (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.
