Arrival Announces $300M Investment from Westwood Capital
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British automaker Arrival (NASDAQ: $ARVL; is unveiling a $300 million equity financing line established with Westwood Capital. A shareholders' Extraordinary General Meeting was held to vote on resolutions such as a reverse stock split and capital reduction. Further information regarding these developments can be found in the Business Update Webcast hosted on the 13th of march via Arrival Investor Relations.
“I have come into the business as CEO at a critical time. Arrival has developed innovative technologies and know-how which position us strongly to address the considerable EV market opportunity. We have now taken important steps to help us take advantage of this opportunity, including raising additional capital as well as placing a sharper focus on the key U.S. market and driving significant efficiency improvements.
Looking forward, we will continue developing and validating our vehicles this year. We are also progressing with encouraging conversations with potential partners and investors to effect the next stage of the business plan - bringing Vans into production in Charlotte in late 2024,” commented Igor Torgov, CEO.
Business Updates
Over the past few months, the Company has taken steps to reduce its headcount and cash burn. At the same time, it has set its sights on producing a purpose-built Class 4 XL Delivery Van in its Charlotte factory by late 2024, but that depends on securing funding this year. Additionally, they have been successful in increasing operational excellence and generating up to $350 million of new capital commitments and reducing net debt by $121.9 million. As a result of all these efforts, the key elements of their business plan are as follows:
The Company is lowering its current cash spend to below $35 million each quarter, which will reduce the necessary investment to keep the business running this year. In Q1, they are cutting their global workforce by half, leaving up to 800 employees by March 2023. Furthermore, 10 Vans will be built at their Bicester microfactory in order to progress highly automated factory processes and integrate them with their autonomous mobile robots. These vans will cover 250,000 kms of public road mileage for engineering validation purposes by 2023 too. Additionally, they will be continuing the development of the XL Van for the U.S market, which offers more expensive average selling prices, higher margins and tax credits than its counterpart - requiring a dedicated capital raise for production in Charlotte being targeted for late 2024.
2023 Plans
- XL Delivery Van funding activities are geared towards the launch of production in Charlotte for next year.
- There won't be any Capex commitment until dedicated capital is raised.
- Arrival anticipates reaching the quarterly $35 million burn rate by the second half of 2023, and with available resources and measures to limit working capital, it appears that sufficient liquidity will be secured to maintain operations into late 2023 without needing investments for XL production.
Reverse Stock Split and Capital Reduction
The Shareholders on April 6, 2023 to discuss a proposed reverse stock split at a consolidation ratio between 30:1 and 50:1. If approved, this position the Company to regain compliance with Nasdaq's minimum bid requirement for ordinary shares trading above $1 for 10 consecutive business days prior to May 1, 2023. Shareholders will also be asked to vote on a capital reduction to $156,532.22 without cancelling or paying out any shares, setting the par value of ordinary shares at around $0.0002 each before the split. Those who owned a share of the Company as of March 28, 2023 are eligible to make their decision on these resolutions.
Going Concern
At the end of December, the firm had $205 million in cash. Afterwards, a deal involving its largest bondholder Antara was announced, including up to $50 million in extra capital commitments. Additionally, a $300 million equity financing agreement with Westwood Capital came out this morning. In January, further business restructuring was unveiled with a workforce decrease to less than 800 people and cost cutting steps that are expected to bring quarterly cash burn to a maximum of $35 million. Lastly, the Company approved a new business plan based on these targets as well as concentrating production on the US market at Charlotte in 2024.
As of December 31, 2022, the Company lacked enough cash to operate for the year ahead. To mitigate the adverse effects, it has taken steps to cut costs and secure capital post-year end. It believes that it is able to maintain operational activity through late 2023 while searching for additional investments to manufacture vehicles in late 2024; this includes prototyping, tooling, expenditure on premises and working capital. Despite these mitigating measures, there are still concerns surrounding its ability to continue as a going concern due to needing further funding sources. Thus, the Board concluded that its unaudited financial data is accurately listed with a going-concern basis, without any necessary changes.
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