Struggling electric vehicle company Arrival has secured a $300 million lifeline to help it stay in business until the end of 2023, but no later. The company is seeking additional dedicated funding to develop its XL delivery 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 facility on its fourth-quarter and full-year 2022 earnings call. The company also scheduled an Extraordinary General Meeting of shareholders for April 6 to vote on a series of of resolutions, including a reverse stock split to help it regain compliance with the Nasdaq.
Arrival had initially reported earnings last week but delayed a call with analysts until today to finalize the Westwood transaction. And fair enough, considering how red Arrival is.
The pre-revenue firm has been burning through cash at an astonishing rate, but it still has a hand for more. Arrival is likely to want to tap as little of the Westwood source as possible, lest it reveal too much capital. John Wozniak, Arrival’s chief financial officer, said the company hopes to raise an additional $500 million ($100 million to $150 million by the end of this year) to fund the XL program. Arrival hopes the added liquidity, the promise of potentially high-margin XL trucks and more cost-cutting measures will make it an attractive target for investors this year, despite its many failures to meet production deadlines in the past.
The business update comes less than two months after Igor Torgov, a former Arrival executive, 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 back. Torgov immediately spearheaded drastic cost-cutting measures, including a 50% reduction in staff that should be completed by the end of March 2023 and will leave Arrival with fewer than 800 employees.
In February, Arrival secured up to $50 million of new equity capital through the sale of common shares to Antara Capital Master Fund, helping the company reduce its net debt by $121.9 million.
Now, as part of Arrival’s new business plan, the company intends to reduce its target cash spend 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 exited several leased sites. The company has also implemented a hiring and spending freeze, including restrictions on all new purchase commitments.
Fundraising for 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 phase out production at its micro-factory in Bicester, UK, and direct resources towards building a micro-factory in Charlotte. .
“The larger size of the market for commercial vehicles in the US, coupled with higher average sales 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 US. USA,” Wozniak told listeners on Monday.
Arrival said the $500 million would help it invest in supplier production tooling and prototypes, complete equipment procurement and installation, and provide working capital to begin production of XL vans, designed specifically for last-mile deliveries, in the USA by the end of 2024.
Meanwhile, Arrival is still working to build 10L vans at its Bicester facility by August; so far he has built two. The goal is to further develop the highly automated factory processes that Arrival had promised would differentiate its micro-factory model from the standard large assembly line model. The UK-built vans will also be used to rack up 250,000 kilometers of public road mileage to validate Arrival’s engineered designs and components by the end of 2023.
“Because of the high transfer, components and engineering solutions from the Bicester L truck to the XL truck, we had a considerable advantage in engineering the design of the XL truck,” said Wozniak. “Although the vehicles are obviously of different sizes, almost all of the components for the low-voltage electrical and control system were transferred. Similarly, engineering solutions for the body structure, interior closures and some chassis systems were also carried over from the Bicester L truck.”
Reverse stock split
Last November, Arrival received a delisting warning from the Nasdaq because its shares were trading too low. Arrival shares closed Monday at $0.18 but rose to $0.20 after the trade update. The company will ask shareholders to vote next month on a proposed reverse stock split with a consolidation ratio in the 30:1 to 50:1 range to help the company regain Nasdaq compliance.
At the general meeting, Arrival will also ask shareholders to vote on a proposed reduction in capital to $156,532.22 with no share cancellation or shareholder payments, which would put the company’s share value at about $0.0002 per share before of the implementation of reverse actions. split.
