The competition in the electric vehicle (EV) market, dominated by Tesla (TSLA), has been challenging for traditional automobile companies. In 2023, approximately 1.2 million electric vehicles were sold in the U.S., representing only about 7.6% of all vehicle sales, as reported by Kelley Blue Book.
Despite the growing popularity of EVs, competing for a share of this relatively small market segment has proven to be tough for many EV manufacturers. The intense competition and the high costs associated with developing and producing electric vehicles have led some companies in the industry to file for bankruptcy.
Lordstown bankruptcy confirmed
The challenges facing EV companies extend beyond the United States. Lordstown Motors, based in Lordstown, Ohio, filed for Chapter 11 bankruptcy in July 2023 with plans to restructure and sell its assets. After more than seven months of reorganization, the company’s Chapter 11 plan was confirmed on March 5, positioning it to emerge from bankruptcy.
Similarly, Arrival, a British EV manufacturer, encountered financial difficulties and entered administration, the U.K. equivalent of bankruptcy, in February. Despite ambitious plans to produce large vans, buses, and vehicles for ride-hailing services, Arrival had not made any sales before facing administration.
Furthermore, an important EV infrastructure provider in the United States also faced bankruptcy proceedings with hopes of restructuring and emerging as a stronger company.
Charging station maker will hand company to its lender
Charge Enterprises, a manufacturer of electric vehicle charging stations, filed for a prepackaged Chapter 11 bankruptcy on March 7 in the U.S. Bankruptcy Court for the District of Delaware. The filing includes a restructuring support agreement aimed at transferring 100% ownership of the company to prepetition lender Arena Investors. The bankruptcy filing follows an inability to redeem approximately $9.9 million in assets from investment adviser Korr Acquisitions Group due to an alleged breach of fiduciary duties. Additionally, Korr refused to purchase $5 million in Charge common stock under a securities purchase agreement entered into on Aug. 11, 2023.
The shortfall resulting from the withheld investment funds and Korr’s refusal to purchase the stock prevented Charge from meeting payment obligations on $25.8 million in non-convertible notes owed to Arena, which matured on Nov. 19, 2023. Arena subsequently sent letters of default to Charge in November.
In response to these issues, Charge filed a lawsuit against Korr and its founder Kenneth Orr on Jan. 8, 2024, in the Supreme Court of New York. The lawsuit alleges breach of fiduciary duties, unjust enrichment, constructive trust, conversion, fraud in the inducement, and other claims. Charge is seeking equitable relief, a temporary restraining order, an injunction against further dispersal or movement of its assets, and damages exceeding $15 million.
Charge Enterprises disclosed assets totaling $114.3 million and liabilities of $48.7 million in its Chapter 11 bankruptcy petition.
Before initiating the Chapter 11 process, Charge engaged Piper Sandler in January 2024 to explore the sale of all its operating non-debtor subsidiaries. These subsidiaries covered various sectors, including broadband and wireless, electrical contracting services, electric vehicle charging, and fleet services. Despite this exploration, Charge ultimately determined that a prepackaged bankruptcy with a sale to its lenders would be the most advantageous course of action.
In the proposed prepackaged bankruptcy, Charge intends to secure $10 million in debtor-in-possession financing from its prepetition lenders. This financing would provide immediate access to $4 million upon interim order approval, with the remaining $6 million available upon final DIP order.
Under the terms of the prepackaged bankruptcy plan, Arena Investors would receive 100% ownership of the new reorganized debtor’s common stock. General unsecured claims would remain unaffected, while preferred and common equity would not receive any distribution.
Charge aims for prompt confirmation of its Chapter 11 plan by April 24, 2024, or as soon as practically feasible thereafter.
In 2023, Charge had been expanding its business activities. On August 1, it acquired Greenspeed Energy Solutions, a provider of charging infrastructure, solar, and energy storage, for up to $15 million. Subsequently, on August 28, Charge entered into an agreement with Stellantis, a major auto company, to serve as an EV charging installation partner for Stellantis’s extensive U.S. dealer network comprising over 2,600 locations.