ELMS stock outlook as Electric Last Mile goes bankrupt

The Electric Last Mile Solutions (NASDAQ: ELMS) stock price is set to crash to zero after the company filed to go bankrupt. The stock ended the week at $0.51, which was about 96% below its all-time high. Its market cap closed the week at about $62 million. At its peak, the company was valued at over $1.4 billion.

EV company goes bankrupt

As the world transitions from combustion engines to electric vehicles, the number of EV scams has been rising. 

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The concept is relatively easy to carry out. It begins by coming up with good-looking renders and prototypes. They also raise funds from both venture capital firms and from customer pre-orders. 

At times, these companies go public, mostly by merging with a SPAC. SPACs are usually better options for going public since these firms don’t need to disclose a lot. 

This is the exact story of Electric Last Mile Solutions, an EV company that is expected to file bankruptcy filings this week. During the weekend, the company announced that it will liquidate through Chapter 7 this week. The announcement comes just a year after the company went public by merging with a SPAC.

The bankruptcy comes a few weeks after ELMS warned that it could run out of cash. It also comes a few months after the company’s two founders – James Taylor and Jason Luo – announced that they were stepping down. They resigned after being accused of making improper stock purchases before the SPAC merger in 2020. Its auditor, BDO also decided to quit.

What next for ELMS stock?

Electric Last Mile Solutions decided to file Chapter 7 bankruptcy, which means that the company will now move to liquidate in order to pay its debt. This is notable since the company currently does not generate income. 

Chapter 7 differs from Chapter 11 bankruptcy that Revlon is expected to file this week and that Hertz filed during the pandemic. In Chapter 11, the company works with external parties to reorganize its debt. This explains why Hertz was able to go back into public markets.

Therefore, there is a likelihood that ELMS stock will crash to a new low when the market opens. As a result, the company’s stock could delist from Nasdaq.

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