Following a brief glimmer of astounding optimism followed by years of frustration, electric vehicle (EV) upstart Arrival (NASDAQ:ARVL) appears to recognize the writing on the wall. According to a disclosure, management seeks either a sale of the company or other strategic alternatives. Subsequently, ARVL stock skyrocketed, though it will be of little comfort to longtime stakeholders.
From Arrival’s Form 6-K filed with the U.S. Securities and Exchange Commission (SEC) earlier today, Arrival entered into a new secured bridge financing deal of up to $50 million of additional liquidity. Said funds stem from private equity firms Antara Capital LP and Highbridge Capital Management, LLC. Specifically, the terms break down as follows:
- Under Tranche A, which represents a first lien, Arrival immediately received $10 million. A provision exists of a further $20 million of new drawings, subject to the agreement of the lenders.
- Under Tranche B, essentially the second lien but not referred to as such in the Form 6-K, up to $90 million is available. This bridge would involve exchanging existing convertible senior notes.
- Interest of the financing is based on the secured overnight financing rate (SOFR) plus 8%, with an exit fee of 2.25% of committed amounts and capitalized interest.
- The financing term is for 120 days, maturing on March 12, 2024.
Subsequently, the last bullet point gives a tight window to figure out what it wants to do.
ARVL Stock Overall Symbolizes a Credibility Drain
With Arrival suffering significant damage in the market, it’s understandable that waving the white flag bolstered ARVL stock. Still, trading hands at about $1.26 per share at the time of writing, no investor should mistake the EV manufacturer — which primarily specializes in lightweight commercial vehicles — as a compellingly viable opportunity.
At one point, ARVL stock was the talk of the town. Back in late 2020, on a reverse-stock-split basis, data from Google Finance reveals that shares — under a weekly average print — posted a price exceeding $1,500. However, based on the current price, Arrival hemorrhaged more than 99% of its equity value since its public market debut.
Further, a TechCrunch report presented an unflattering but not unfair assessment of the troubles affecting ARVL stock. Senior Reporter and Editor Kirsten Korosec wrote the following:
“Arrival plans to the use the bridge financing along with its remaining cash on hand to find a buyer or other ‘strategic alternative transaction.’ In other words, Arrival has been given a tight framework to sell the company and pay back companies and people its indebted to. It’s the equivalent of lending someone $5 to buy enough gas to drive the car down to the dealer and sell it.”
As Korosec mentioned, Arrival once represented a high-flying EV startup with an ambitious plan to build electric buses, vans and even a car designed for drivers of the ride-sharing platform Uber (NYSE:UBER). Unfortunately, in the past 15 months, “the company has laid off workers four times, slashed production targets and dropped its Uber car and bus programs,” among other troubles.
Why It Matters
Per TipRanks, no analysts cover ARVL stock, which isn’t that surprising. Also, Arrival symbolizes the rise and fall of the mania involving speculation on special purpose acquisition companies (SPACs). As an early 2023 report by Yale Journal on Regulation revealed, the average post-merger returns at that time sat at a loss of 62%.
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.