What happened
Arrival (ARVL 1.30%) provided its second-quarter update Thursday, and it indicated the electric vehicle company is working as hard to stay afloat as it is to get its products into production. Investors noted that, knocking its shares down 12.4% as of 10:20 a.m. ET.
So what
Arrival told investors it remains on track to begin production of electric vans at its facility in the U.K. in the current quarter, and said it has about $6 billion in non-binding memorandums of understanding and orders if all are completed. But that's about where the positive news ended. The company is pushing back the pace of its production ramp-up and delaying the start of production at its U.S. plant in North Carolina. Maybe most impactful for shareholders, the company plans to sell another $300 million in stock that will significantly dilute existing shareholders.
Now what
At its recent valuation of approximately $1 billion, the at-the-market offerings will dilute shareholders by nearly one-third. But it seems the company has no choice. It is working on a restructuring that it hopes will cut costs by about 30%. That includes delaying the opening of its U.S. facility, deferring the spending on its electric bus program, reducing headcount, and postponing capital expenditures for some retooling.
The share sales will occur from time to time, with about $90 million expected to be raised this year. The remaining $210 million will come in 2023. The company said it believes these actions will keep it capitalized through 2023. It had $513 million in cash and equivalents as of June 30. But that was down from $735 million as of March 31. Arrival expects to end the year with $300 million to $350 million in cash, including the contribution from the share offering.
All told, this seems to be a company on the brink. It may well succeed, but it will still be costly to existing shareholders. That explains the desire for some to bail out today.
