Arrival hits $300 million lifeline, but still looking for more money

    Struggling electric vehicle company Arrival has secured a $300 million lifeline to help the company through the end of 2023, but not beyond. The company is seeking additional dedicated funds to develop its XL vans for the US market and begin production in Charlotte, North Carolina, by 2024.

    Arrival on Monday announced Westwood Capital’s $300 million equity financing line during its fourth quarter and full year 2022 earnings call. The company also has an Extraordinary General Meeting of Shareholders scheduled for April 6 to vote on a number of resolutions including a reverse stock split to help it meet the Nasdaq again.

    Arrival had initially reported earnings last week, but delayed hosting a call with analysts until today to finalize the Westwood transaction. And fair enough, considering how in-the-red Arrival is.

    The pre-revenue company has squandered money at a surprising clip, but it still has its hand out for more. Arrival probably wants to drain as little of Westwood’s fountain as possible, lest it give away too much equity. Arrival chief financial officer John Wozniak said the company hopes to raise another $500 million — $100 to $150 million — by the end of this year to fund the XL program. Arrival hopes that the additional liquidity, the promise of high-margin XL vans and further cost-cutting measures will make it an attractive target for investors this year, despite the fact that it has often failed to meet production deadlines in the past.

    The company update comes less than two months after Igor Torgov, a former director of Arrival, took over as CEO of the company. Torgov replaced interim CEO Peter Cuneo, who was appointed in November 2022 when Arrival founder Denis Sverdlov stepped down. Torgov immediately led drastic cost-cutting measures, including a 50% headcount cut that should be complete by the end of March 2023 and will leave Arrival with fewer than 800 employees.

    In February, Arrival secured $50 million in new equity through the sale of common stock to Antara Capital Master Fund, enabling the company to reduce its net debt by $121.9 million.

    Now, as part of Arrival’s new business plan, the company plans to reduce its target out-of-pocket expenses to no more than $35 million per quarter. Arrival has simplified its global entity and real estate footprint to focus on the US market, and has already vacated several leased sites. The company has also introduced a personnel and spending freeze, including restrictions on all new purchase commitments.

    Raising funds for the production of XL vans in the US

    Arrival has focused all of its efforts on its US product strategy since the third quarter, when the company decided to halt production at its micro-factory in Bicester, UK, and instead direct resources towards the construction of a micro-factory in Charlotte.

    “The larger commercial vehicle market size in the U.S. coupled with higher average selling prices and margins and IRA tax credits of up to $40,000 per vehicle create an extremely attractive opportunity for electric commercial vehicles in the U.S.,” Wozniak told listeners Monday.

    Arrival said the $500 million would help invest in production tooling and supplier prototyping, complete equipment acquisition and installation, and provide working capital to begin production of XL vans — purpose-built for last-mile deliveries — by the end of 2024 – in the US by the end of 2024.

    In the meantime, Arrival is still building 10-litre vans at its Bicester facility by August – it has built two so far. The aim is to further develop the highly automated factory processes Arrival promised, which would differentiate the micro factory model from the standard large assembly line model. The UK-produced vans will also be used to complete 250,000 miles on public roads by the end of 2023 to validate Arrival’s engineering designs and components.

    “Because of the high transfer, components and engineering solutions from the Bicester L van to the XL van, we had a significant lead in XL van engineering in design,” said Wozniak. “Although the vehicles are clearly different in size, almost all low voltage electrical and control system components have been adopted. Similar technical solutions for the body structure, interior closures and some chassis systems were also adopted from the Bicester L van.”

    Reverse stock split

    Last November, Arrival received a delisting warning from the Nasdaq because the stock was trading too low. Arrival shares closed at $0.18 on Monday, but jumped to $0.20 after the company update. The company will ask shareholders next month to vote on a proposed reverse stock split with a consolidation ratio in the range of 30:1 to 50:1 to help the company regain compliance with the Nasdaq.

    At the general meeting, Arrival will also ask shareholders to vote on a proposed capital reduction to $156,532.22 with no cancellation of shares or payments to shareholders, which would bring the value of the company’s stock to approximately $0.0002 per share prior to the implementation of the reverse stock. divide.

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