Shares of Electric Last Mile Solutions (NASDAQ:ELMS) are plummeting lower by more than 60% after the company announced that it would liquidate its assets through a Chapter 7 bankruptcy filing. The company decided to pursue Chapter 7 after a “comprehensive review of the company’s products and commercialization plans” showed no better options for shareholders. A Chapter 7 filing allows a company to liquidate its assets in order to pay off creditors.
The unfortunate news comes less than one year after ELMS stock made its market debut through a special purpose acquisition company (SPAC) merger. In March, the company had announced it was under investigation by the U.S. Securities and Exchange Commission (SEC). A month before that, the company announced the unexpected resignations of its CEO and chairman. The two executives allegedly purchased shares of their own company at a discount before an independent valuation was calculated.
ELMS Stock Plummets After Announcing Chapter 7 Bankruptcy
Since the departure of the two executives, Electric Last Mile has been unable to obtain financing. This is because an earlier investigation found that the company’s financial statements were inaccurate. In addition, BDO LLP, the company’s auditor, quit just one week after the two executives left. As a result, the company has yet to file its 2021 annual report and Q1 2022 earnings report.
Shauna McIntyre has served as interim CEO in the meantime. She explained:
“I’m very disappointed by this outcome because our ELMS team demonstrated incredible determination to get our electric vans ready to meet the critical need for clean, connected vehicles that reduce carbon emissions from ground transportation. Unfortunately, there were too many obstacles for us to overcome in the short amount of time available to us.”
Electric Last Mile will be the first post-SPAC electric vehicle (EV) maker to file for bankruptcy. The EV company had initially planned to import EV delivery vans for China and assemble them at a General Motors (NYSE:GM) plant. Last month, the company warned that it might run out of cash during June.
The company’s market capitalization peaked at $1.4 billion shortly after its market debut. Today, it carries a market cap of about $23 million.
On the date of publication, Eddie Pan 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.