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Aug 26, 2023

SPAC Bamboozle Keeps on Giving: Stock Shredded, Low on Cash, Layoffs Underway, Volta Goes after Government Subsidies for EV Charging Stations

Volta Inc., which went public via merger with a SPAC in August last year, sells

Volta Inc., which went public via merger with a SPAC in August last year, sells EV charging stations with big billboard-like media screens that allow or force people to watch ads while they wait for their vehicle to be charged. The media screens also face passersby, and so there are more eyeballs.

The company earns revenues from its EV charging network and from selling ads on these billboards. But not a lot: It's infamous for having lost $276 million last year on $32 million in revenues, based on the unassailable Silicon Valley strategy of "growth at all cost." In 2021, its revenues grew by $13 million; and its losses grew by $206 million. You get the idea. That kind of growth model.

Headquartered in ultra-expensive San Francisco, it burned about $100 million in cash in Q2, at the end of which, it had $105 million in cash left on its balance sheet. That's not a lot of runway at this cash-burn rate. Earlier this month, it filed a prospectus with the SEC for an "at the market" share offering to raise up to $150 million by selling shares "from time to time." Which will be kind of a slog because the shares have collapsed by 89% from the post-SPAC-merger intra-day high of $14.34, and by 88% from its closing high of $13.04, which gave the company an absurd market cap of $2 billion – almost exactly a year ago, on September 19, 2021, to $1.55 today (data via YCharts):

In March, the company announced that CEO Scott Mercer resigned but would stay on for a transition period, and that President Christopher Wendel resigned "effective immediately." They both resigned as members of the Board, "effective immediately." That kind of company.

#1, The model of "growth at all cost" has been taken to the dump, and it's time to cut costs and lay off people, and cut "outside consultants," and consolidate "its three San Francisco offices into one," and cut "marketing and administrative costs."

As part of these cost cuts, the company announced today afterhours that it would lay off 10% of its full-time staff going forward, after it had already shed 18% of its full-time staff since June 1 "through other workforce reductions and organic attrition."

Volta is "taking difficult but important steps to align the business with current market dynamics and position the company for long-term success," it said.

#2, The company cut its revenue guidance for Q3 by roughly 20% to a range between $13.5 million and $14.5 million. And it withdrew its full-year guidance, blaming: "the advertising environment, particularly as automotive brands delay advertising spend due to inventory shortages; limited electrical transformer availability affecting DC Fast charger installations; and the impact of the Q4 shopping season on construction availability at commercial properties." It didn't blame the strong dollar tho – unlike most of its big brethren – which would have been a hoot.

The thing is the "growth at all costs" model works great if you have enough cash to pay for all the costs forever. But if you run out of cash, not only is the growth over, but the entire show is over, and everyone goes home. And now cash is running low, and it's time to pivot, like toward a new model… And you know what's coming.

#3, Congress threw hundreds of billions of dollars in all directions, including some of it at companies that build EV charging networks, and so Volta announced today that it is scrambling to get its slice of the federal pie.

Under the section in its announcement, titled "Competing for Federal Funds," the company said that its "dedicated team is well-positioned as a public-private partner for state and federal government funding." It said that it "intends to continue prioritizing EV charger installations that qualify for government-provided funds.

It wants to "leverage" its infrastructure planning software PredictEV, it said: "By analyzing multiple data sources, including local economic and equity data, PredictEV can identify locations within the company's pipeline of more than 8,200 EV charging stalls signed or covered under master service agreements (MSAs) that satisfy the government's requirements."

Sure, but everyone and their dog has been installing charging stations for years, from Tesla on down, and they’ll be competing for federal subsidies. In California alone there are already over 79,000 charging stations, compared to 7,572 gasoline stations, according to the EIA. Everyone is going after it. The little parking lot of the Walgreens in my neighborhood has had them for many years.

It's not like Volta invented anything new. What's new with Volta is that its charging stations have media screens that show ads. And the government doesn't care about that.

Corporate America has long been doing it. This includes the richest semiconductor makers such as Intel and Nvidia, and even foreign companies with a presence in the US, that are just now getting $52 billion in federal subsidies poured into their end of the trough. So compared to them, whatever crumbs Volta can get, if any – squeezed between the big charging-station companies – will be small, but they better get money into the door soon, or else the show is over and everyone goes home.

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