How Did Electric Last Mile (ELMS) Stock End Up in Delisting Territory?

On the surface, Electric Last Mile Solutions Inc. (ELMS) seemed like a solid green investment for impact investors when it went public via a SPAC in June 2021. Since then, the company has revealed just how troubled it is, with the latest announcement being a confirmed SEC probe. Now, ELMS stock has fallen below the $1.00 mark, which means that it's at risk for delisting from the Nasdaq Exchange.

Here’s what we know about whether ELMS stock will delist and when advancements may occur.

The SEC is probing into ELMS operations. The company confirmed that it found out about the investigation on March 7.

ELMS wrote in an SEC filing that it “intends to cooperate fully with the SEC investigation” and, at this point, “cannot predict the eventual scope, duration, or outcome of this matter.” ELMS knows that it needs to raise more capital to finally get its vehicles to market, which would prove the risk that accompanies speculative EV investments.

The SEC investigation pertains largely to the company’s financials, accuracy of forward-looking projections, and executive leadership.

In early February, ELMS co-founders James Taylor and Jason Luo resigned from their position. Before announcing their plan to take ELMS public via a SPAC in 2020, Taylor and Luo bought low-cost shares below market value. The duo failed to obtain an independent valuation for the equity. Instead, they sought to undermine the market and capitalize on a merger into the public market.

Since then, interim CEO and president Shauna McIntyre said, “I am here to assure you of my commitment and dedication to the company and all of our stakeholders—investors, customers, suppliers, and our entire team of hardworking employees.” Investors seem to be getting the short end of the stick.

ELMS stock lost about half of its value overnight, which left the stock trading at $0.96 by 12:00 p.m. ET on Tuesday, March 15. The shares have fallen more than 90 percent since the stock has been publicly traded.

The Nasdaq Exchange delists stocks when they have traded below the $1.00 mark for 30 consecutive days. ELMS will need to recuperate its stock value or perform a reverse stock split if it wants to remain publicly traded. Reverse stock splits are often a desperate attempt to remain publicly listed and won’t necessarily do the stock any good in the eyes of investors.

Any prior earnings guidance for investors is in the trash and ELMS seeks to reconfigure its outlook and determine how it will operate when its current cash flow runs out sometime between June and September 2022. For ELMS, getting delisted would do more than just send the company private — it could shutter efforts to get the last-mile EV offering to market entirely.