Electric Last Mile Solutions Reaches Its Last Mile: Chapter 7 Bankruptcy

Electric Last Mile Solutions has had a dramatic year. What happened to the company? Here’s what led to its downfall and recent bankruptcy filing.

Rachel Curry - Author

Jun. 13 2022, Published 12:15 p.m. ET

After a tumultuous year, Electric Last Mile Solutions (ELMS) has announced it filed for Chapter 7 bankruptcy under interim CEO Shauna McIntyre. The move comes after an internal scandal and near delisting that decimated investors.

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How did the EV startup ELMS wind up underwater? Here are the details of this troubled journey, from insider trading to a funding desert.

Electric Last Mile Solutions files for Chapter 7 bankruptcy.

Source: Shauna McIntyre

Electric Last Mile Solutions interim CEO Shauna McIntyre

ELMS announced on Sunday, June 12 it filed for Chapter 7 bankruptcy. The electric vehicle company, focused on commercial vans and utility trucks, has had a tumultuous year since going public in June 2021 via a SPAC. According to McIntyre, the decision to file for bankruptcy proved beneficial for ELMS shareholders compared to other options.

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What is Chapter 7 bankruptcy?

Oftentimes, when you hear about a company filing for bankruptcy, it may refer to Chapter 11 bankruptcy which allows the company to reorganize and operate while repaying creditors. Chapter 7 bankruptcy is different.

Chapter 7 bankruptcy requires companies to liquidate and sell most of their assets in order to pay back creditors. In the case of ELMS, this includes shareholders of its still-public, long-floundering stock. Chapter 7, or liquidation bankruptcy, doesn't require a repayment plan.

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The relatively short road: How ELMS got here

ELMS went public via a SPAC at around $10 per share nearly one year ago. The stock has since lost more than 98 percent of its value, with an approximately 65-percent jump off a cliff occurring on July 13 in response to the bankruptcy news.

Founder and former chairman Jason Luo and former CEO Jim Taylor were in executive roles in February 2022 when an internal investigation revealed controversial information about them. According to the probe, Luo and Taylor purchased ELMS stock on insider information just before announcing the ELMS SPAC in December 2020. The former executives also never received an independent appraisal of their shares at the time of purchase.

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Luo and Taylor voluntarily stepped down and interim executives stepped into their place. However, the controversy made it difficult for ELMS to secure funding and the situation got worse. ELMS stock continued to decline and it weaved in and out of delisting territory for about two months (trading below the $1.00 mark, which the Nasdaq Exchange has the power to delist a company for after 30 consecutive days).

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Meanwhile, the SEC began its own investigation, making ELMS even less attractive to potential investors. The company has laid off at least 24 percent of its workforce as new information comes to fruition.

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Each one of these controversies has slimmed the startup’s chance of survival. ELMS wrote in a statement, “The compound effect of these events, along with a pending SEC investigation initiated this year, made it extremely challenging to secure a new auditor and attract additional funding.”

ELMS is a special circumstance. However, as Electric Last Mile Solutions proceeds with Chapter 7 bankruptcy, the market is giving investors with a grim reminder that startup SPACs, especially those in industries that take years to profit, are historically disappointing.


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