MULN - As Lordstown Motors collapses Mullen Automotive Canoo could be next
2023-06-27 03:07:00 ET
Lordstown Motors ( NASDAQ: RIDE ) became the first electric vehicle company to file for bankruptcy protection. The company has struggled to raise capital and build its trucks after Foxconn withdrew from its partnership.
Electric vehicle company collapses
Lordstown Motors is an EV company that attempted to build trucks in Detroit. The company’s business model was relatively easy. It would do the research and sell it trucks. Instead of manufacturing, Lordstown would partner with Foxconn, the giant Taiwanese manufacturer that would build its vehicles. This is the same model that has been used by Fisker.
Building EVs from scratch is a highly expensive process as evidenced by the vast sums companies like Tesla, Rivian, and Lucid Motors have spent in the past few years. In Lordstown Motors case, the company spent over $15.6 million in 2019 and $102 million in 2020. Its expenditures grew to over $275 million in 2022.
As a result, its cash ran out. The last report showed that its cash and short-term investments dropped to $176 million. At the time, the company blasted Foxconn for not providing it the funds it had promised in 2022.
Lordstown’s bankruptcy was easy to predict. In this article I wrote in May, I warned that the shares would crash to zero as its cash reserves dwindled.
Lordstown Motors vs Mullen Automotive, Canoo stocks
Mullen Automotive and Canoo could be next
Lordstown Motors will not be the only EV company to go bankrupt this year. As I have warned before, Mullen Automotive ( NASDAQ: MULN ) and Canoo could also collapse as liquidity thins.
While Mullen Automotive has started vehicle deliveries, its balance sheet seems inadequate to support its operations. The last report showed that the company had over $60.3 million in cash and short-term investments. It also had over $14.8 million in accounts payable and $121 million in total current liabilities.
Now, compare these numbers to the company’s quarterly expenses. Mullen Automotive had over $67.9 million in operating expenses in the first quarter and $73.6 million in the previous quarter. Therefore, even if the company cuts costs and starts receiving income, it will need to raise capital soon.
Canoo is another troubled EV company that could go bankrupt too. The most recent quarter showed that the company had over $81.5 million in expenses, down from the previous $83.2 million. It has spent almost a billion dollars since 2022.
Now, compare this with its cash balances. Canoo ended the quarter with less than $10 million down from over $40 million in Q4. Therefore, the company needs to raise money, which is tough since its stock has crashed by 83% this year.
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