Electric Last Mile Co-Founders Resign—Will ELMS SPAC Stock Delist?

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Feb. 3 2022, Published 12:03 p.m. ET

EV startup Electric Last Mile Solutions Inc. (ELMS) merged with a blank-check firm last year, which made it one of the hundreds of companies that merged with a SPAC to list on the public market in 2021. Now, ELMS stock has been gutted and investors wonder if there’s any chance for redemption.

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Will ELMS stock delist or will the company—coated in controversy thanks to two corrupt co-leads—manage to make it through the muck?

Electric Last Mile co-founders have resigned after sneaky share transactions.

By nature, a de-SPAC (or merger with a blank-check firm) is a back-door route to go public. However, that doesn’t mean investors want companies to make back-door investments behind a curtain.

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Unfortunately for ELMS investors, that’s exactly what happened. The company went public in June 2021. Before announcing the SPAC agreement the previous December, ELMS co-founders James Taylor and Jason Luo made share transactions that provided them with low-cost equity well below market value. Reports suggest that they didn't obtain an independent valuation for the equity.

Taylor and Luo have since resigned from their roles as CEO and Chairman of the Board, respectively. ELMS has brought in interim replacements and is working on a long-term plan.

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ELMS stock lost more than 50 percent in a day.

When the market opened on Feb. 1, ELMS stock fell 33.63 percent overnight. By the end of the day, that number rose to 51.52 percent, which put ELMS deeply in the red. All time, the stock has lost 76.22 percent of its value.

What’s next for ELMS?

The ELMS drama is a result of an internal investigation, which suggests that the larger company wants to move forward. However, Taylor and Luo will reportedly maintain consulting relationships with the company “to help ensure that ELMS continues to deliver on its development and sales pipelines.” It seems that their influence is far from over.

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On Feb. 1, analysts downgraded ELMS at a rapid pace. The primary reason is a lack of experienced and trustworthy executives. For investors in the public market, trades go beyond fiscal health. The health of a company’s internal structure matters, too.

However, even fiscal health is in question. Previous financial statements are being reworked given the co-founders’ unfair stake.

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Will ELMS stock recover or delist?

If ELMS stock continues to deteriorate from its value of $2.26 per share as of the morning on Feb. 3, it could trade below the $1.00 mark. This makes it a delist candidate for the Nasdaq Exchange, which says a listed company might be delisted if it trades below $1.00 for 30 days.

Even if the stock continues to plummet, the company could pull a reverse stock split to keep it afloat. However, combining shares for a larger per-share value isn't the same thing as actually increasing that value.

Jefferies downgraded ELMS on Feb. 3. There’s still a chance for recovery but the prospect has been dimmed. In the meantime, interim CEO Shauna McIntyre and interim chair Brian Krzanich will work tirelessly to keep ELMS afloat.

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