SPAC Bamboozle Keeps Giving: Shredded Inventory, Low Money, Ongoing Layoffs, Volta Tackles Government Subsidies for Electric Vehicle Charging Stations

The “growth at all costs” model has been thrown out.

By Wolf Richter for WOLF STREET.

Volta Inc., which went public via a merger with a SPAC in August last year, sells electric vehicle charging stations with large media screens resembling billboards that allow or compel people to watch advertisements while waiting for their vehicle to be recharged. Media screens also face passers-by, and therefore there are more eyeballs.

The company derives revenue from its electric vehicle charging network and the sale of advertisements on these billboards. But not by much: it is infamous for losing $276 million last year out of $32 million in revenue, based on Silicon Valley’s unassailable “growth at all costs” strategy. In 2021, its revenue increased by $13 million; and its losses increased by $206 million. You had the idea. This kind of growth model.

Based in expensive San Francisco, it burned about $100 million in cash in the second quarter, at the end of which it had $105 million in cash left on its balance sheet. That’s not much of a track at this rate of cash burn. Earlier this month, he filed a prospectus with the SEC for an “in-the-market” stock offering to raise up to $150 million by selling shares “from time to time.” What will be kind of a chore as the shares have crashed 89% from a high of $14.34 after the SPAC merger – which gave the company an absurd market cap of over $2 billion – it almost exactly one year ago, September 19, 2021, at $1.55 today (data via YCharts):

In March, the company announced that CEO Scott Mercer had stepped down but would stay on for a transition period, and that Chairman Christopher Wendel had stepped down “effective immediately.” They both resigned as board members, “effective immediately”. This kind of business.

But now there are all kinds of novelties.

#1, The “Growth at All Costs” Model Has Been Thrown Awayand it’s time to cut costs and lay off staff, cut “outside consultants”, consolidate “its three San Francisco offices into one”, and cut “marketing and administrative costs”.

As part of these cost reductions, the company announced today that it will lay off 10% of its full-time staff in the future, after having already laid off 18% of its full-time staff since June 1. “through further headcount reductions and organic attrition.

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

#2, the company cut its Q3 revenue forecast by about 20% between $13.5 and $14.5 million. And he withdrew his full-year forecast, blaming: “the advertising environment, particularly as automotive brands delay ad spending due to inventory shortages; limited availability of power transformers affecting DC fast charger installations; and the impact of the fourth quarter shopping season on construction availability in commercial properties. He didn’t blame the strong dollar — unlike most of his big brothers — which would have been a hoot.

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

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

In the section of its announcement, titled “Competition for Federal Funds,” the company said its “dedicated team is well positioned as a public-private partner for state and federal funding.” He said he “intends to continue to prioritize EV charger installations eligible for government-provided funds.

It wants to “leverage” its infrastructure planning software PredictEV, he said: “By analyzing multiple sources of data, including local economic and equity data, PredictEV can identify locations in the pipeline of more than 8,200 EV charging stations signed or covered by the main service. (MSA) that meet government requirements.

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

It’s not like Volta invented anything new. The novelty of Volta is that its charging stations have multimedia screens that display advertisements. And the government doesn’t care.

When all else fails, try to feed yourself at the deep end of the government.

American companies have been doing this for a long time. This includes the wealthiest semiconductor makers such as Intel and Nvidia, and even foreign companies with a presence in the United States, which currently receive $52 billion in federal subsidies paid into their trough. So compared to them, any crumbs Volta can get, if any – wedged between the big charging station companies – will be small, but they better put some cash in the door soon, otherwise the show is finished and everybody come home.

Do you like to read WOLF STREET and want to support it? You use ad blockers – I completely understand why – but you want to support the site? You can donate. I greatly appreciate it. Click on the mug of beer and iced tea to find out how:

Would you like to be notified by e-mail when WOLF STREET publishes a new article? Register here.

About Christopher Easley

Check Also

Financial watchdog would have better access to SA firm documents under proposed law change

South Australia’s independent financial watchdog is said to have greater access to cabinet documents under …