Proterra Inc. (Nasdaq: PTRA), a struggling electric vehicle components provider, has taken the step of filing for Chapter 11 bankruptcy protection due to industry-wide challenges. This decision follows a recent pattern in the sector, where companies grapple with supply chain hurdles, reduced demand, and financial difficulties.
The announcement comes shortly after Lordstown Motors’ bankruptcy filing, which was triggered by a dispute with Foxconn over a promised investment. Proterra’s move adds to the list of companies facing adversity in the evolving landscape of electric vehicles.
Proterra’s market value had significantly declined, with its shares losing almost half their value. The company now lists its assets and liabilities within the range of $500 million to $1 billion. This marks a significant decline from its valuation of $1.6 billion, including debt, during a merger deal in January 2021.
“We have faced various market and macroeconomic headwinds that have impacted our ability to efficiently scale all of our opportunities simultaneously,” said CEO Gareth Joyce. “The foundation we have built has set the stage for decarbonization across the commercial vehicle industry as a whole, and we recognize the great potential in all of our product offerings to enable this important transformation. This is why we are taking action to separate each product line through the Chapter 11 reorganization process to maximize their independent potential.”
The company, known for producing electric buses and battery packs, intends to navigate the bankruptcy process while maintaining its operations. Proterra’s strategic approach involves utilizing the bankruptcy court to facilitate the utilization of its existing resources for ongoing expenses.
Proterra intends to utilize its current capital, which stood at $296 million in cash and similar assets by the close of the first quarter, to support its ongoing activities. This encompasses covering employee compensation and perks, as well as settling obligations with suppliers for forthcoming acquisitions, while adhering to Chapter 11 regulations that permit the suspension of previous payments.
Following its submission to the U.S. Bankruptcy Court in Delaware, Proterra opted to cancel its scheduled second-quarter earnings call slated for Wednesday. This decision coincided with a 10% drop in Proterra shares to $1.43 upon closing, which further plummeted by over 65% to less than 50 cents during post-market trading.
Earlier this year, Proterra had already revealed its intentions to implement cost-cutting measures, including 300 job cuts and consolidation of bus and battery making in South Carolina.
Confronting the possibility of loan defaults in March, Proterra negotiated an extension of these loans until 2028, with the stipulation that the company would accept an elevated interest rate of 12% annually, payable in both cash and stock.
Numerous other contractual terms, such as the condition that Proterra maintain $125 million in cash reserves at the close of each quarter, were waived by the lenders. Additionally, the lenders consented to disregard Proterra’s auditor’s notice regarding concerns over the company’s financial viability.
Based in Burlingame, California, Proterra has filed for Chapter 11 protection in the District of Delaware, where it is incorporated. The goal of this move is to secure the company’s financial stability through reorganization or potential divestiture of certain business units.
Information for this briefing was found via Reuters, Freight Waves, EDGAR, and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
