EV startup Electric Last Mile discloses SEC probe, warns of cash crunch

Electric Last Mile Solutions Inc. said it’s under investigation by the U.S. Securities and Exchange Commission, just weeks after both its chairman and CEO resigned following an internal probe of improper stock purchases.

The EV startup learned of the investigation by the SEC’s Division of Enforcement on March 7, according to a regulatory filing Friday. The company also said it’s withdrawing previous guidance and will need to raise cash to get vehicles to market.

The disclosures mark a long fall for the company, which bought a former Hummer factory and outlined plans to sell delivery vehicles to the likes of FedEx Corp. ELMS, as it’s known, was carved out of China’s Chongqing Sokon Industry Group Co. and went public via a SPAC deal in December 2020 at a value of $1.4 billion.

James Taylor, its former CEO, and Executive Chairman Jason Luo resigned last month after an internal probe discovered improper share purchases before the company announced plans to go public. Its auditor also resigned around the same time. On March 4, the company said it’s cutting 24 percent of its headcount.

Taylor was going to stay on as a consultant for two years, but since then the company has “notified Mr. Taylor of its decision to terminate the consulting agreement,” according to the latest filing. He had said in 2021 that Electric Last Mile had pre-orders for 45,000 vans.

Shares of ELMS hit an intraday peak of $15.30 in December 2020 and closed at $1.90 Friday in New York, giving it a market value of just $247.5 million. The stock fell more than 17 percent in extended trading following the disclosure.

“The company currently believes it has sufficient cash to continue operations through sometime between July and September 2022,” ELMS said in the filing. “The company will not be able to launch the Urban Delivery, Urban Utility or any other vehicle without obtaining such additional liquidity.”

The company intends to cooperate fully with the SEC investigation, the filing said. At this point, Electric Last Mile can’t predict the eventual scope, duration or outcome of this matter.