Lightning eMotors stock crashes as revenues disappoint Wall Street, investors cry foul

LOVELAND — It’s been a tough couple of years for Loveland-based zero-emission-vehicle provider Lightning eMotors Inc. (NYSE: ZEV).

Since raising more than $200 million from investors through a merger with a special-purpose acquisition company in May 2021, the company’s stock has zapped off more than 90% of its value — after Lightning eMotors reported its quarterly and 2022 fiscal year results, the stock traded down more than 40% on Monday alone — and faces the prospect of being booted from the New York Stock Exchange. 

Meanwhile, a class-action lawsuit filed late last month in U.S. District Court in Denver accuses Lightning eMotors’ leadership of misleading investors and regulators. 

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In the fourth quarter of 2022, Lightning produced 128 EVs — up from 38 units in the fourth quarter of 2021 — and recorded revenues of $4.3 million, up from $4.2 million in the prior-year quarter. Wall Street’s consensus estimate for sales was $10.21 million.

Lightning’s net loss for the fourth quarter was $8.6 million, or a loss of 11 cents per share, compared to net income of $22.2 million, or 28 cents per diluted share, during the fourth quarter of last year.

For the full 2022 fiscal year, Lightning eMotors, which in December 2022 was given six months to raise its stock price above the $1 threshold or face delisting from the New York Stock Exchange, reported earnings of nearly $15.2 million on sales of $24.4 million. 

“Our record vehicle production in the fourth quarter capped a year in which we dramatically grew our manufacturing capacity and efficiency, managed through supply chain challenges, introduced new vehicle platforms, and established associations with strong [original equipment manufacturer] partners,” Lightning CEO Tim Reeser said in a prepared statement. “For the year we generated record revenue and made critical investments in key electric vehicle and powertrain technologies.”

Looking ahead, Lighting expects 2023 revenue to be in the range of $35 million to $50 million.

Company officials have laid the blame for much of Lightning eMotors’ lackluster financial performance at the feet of its complex supply chain and of its Romeo Systems Inc. battery production partners at Nikola Motor Co. Additionally, the company has recently pivoted its strategy away from smaller vehicles such as delivery vans and toward buses and box trucks. 

“In January, we announced revenue constraints in [the fourth quarter of 2022,] due primarily to defects that we identified in the Romeo batteries,” Reeser said in a conference call Monday with investors and analysts. “While we expected Romeo and its parent company Nikola to honor their warranty obligations — as they publicly stated they would — they are not. We filed suit against Nikola and Romeo on March 9.”

The company’s production pipeline is “not currently supply-limited for components to build” its existing product mix, Reeser said.

Executives are expected to be cheerleaders for their firms, but a recent lawsuit filed by investor Kelly Lanham on behalf of all Lightning eMotors investors accuses company founders and board members of committing “breaches of their fiduciary duties and violation of the federal securities laws by causing the issuance of materially false and misleading statements” in regulatory disclosures and other public venues.

According to the complaint, Lightning officials, in the run up to the company’s SPAC merger, “claimed that the funding provided through the combination with [SPAC partner] GigCapital3 would purportedly allow Lightning Systems to scale up production and increase its revenues 600% on a year-to-year basis, from $9 million in 2020 to $63 million in 2021, and increase revenues 460% on a year-to-year basis in 2022, to $354 million.”

However, Lightning leaders knew or should have known that the company “could neither rapidly scale its operations as stated, nor achieve the projected revenue forecasts,” the suit claims. “Because of its limited two-year operating history, the company lacked a supply chain adequate to support the forecast production increase. Prior to the merger, Lightning Systems utilized small, secondary suppliers for key parts, including vehicle batteries. Those suppliers lacked the capacity to supply the company with components in quantities necessary to meet vehicle production and, consequently, revenue targets.”

Lightning leaders, who did not immediately respond to requests for comment Monday, have taken on several efforts to boost its stock price, including a late 2022 push for its shareholders to support a reverse stock split. 

The company revealed on Monday that agreements were negotiated last week with certain holders of Lightning eMotors debt that establish a framework for $10.5 million in convertible notes to be converted into 18.75 million newly issued shares of its common stock. 

“We are pleased to take another important step to strengthen our balance sheet by reducing the total amount of our outstanding debt and continuing to lower our interest expense,” Reeser said in a statement.

Lightning’s stock price was 34 cents per share at the completion of trading Monday, down 40.39%.

The class-action lawsuit referenced in this story is Kelly Lanham et al. versus Lightning eMotors Inc. et al, case number 23-cv-00507-NRN, filed in U.S. District Court in Denver.