Electric auto parts supplier Proterra Inc (PTRA) on Monday filed for bankruptcy protection under Chapter 11 to strengthen its financial position through a recapitalization or sale.
Shares of the company plummeted more than 65% in pre-market trading on Tuesday.
KEY LEARNING POINTS
- Amid a slowdown in demand, funding and supply chain constraints, electric car maker Proterra filed for bankruptcy.
- Shares fell more than 65% in pre-market trading on Tuesday.
- Proterra continues its activities and tries to strengthen its financial position through a recapitalization or sale.
Proterra’s assets and liabilities, declared in its Delaware Chapter 11 filing, are at least $500 million each. Voluntary bankruptcy protects the company from creditors as it explores repayment options.
Proterra plans to continue using its existing capital to fund operations during the bankruptcy process. Salaries are paid and suppliers are compensated according to Chapter 11 rules.
The EV battery maker will segregate each product line during the bankruptcy reorganization process to maximize independent potential. Including debt, the company was valued at $1.6 billion in a January 2021 merger agreement with a blank check company.
Proterra posted a loss of $244 million in the first quarter of the year compared to a loss of $50 million in the same period last year. The company acknowledged its history of losses and admitted during its first quarter results that it may not reach profitability going forward.
Earlier this year, Proterra cut jobs and costs by combining electric bus and battery production in South Carolina.
As US consumers look to purchase EVs, rising prices pose an affordability issue, a Deloitte study found earlier this year. Supply chain concerns and drought financing amid sluggish demand have become major challenges for EV manufacturers. Last month, Lordstown, a 2018 EV startup, also filed for bankruptcy while looking for a buyer that would allow it to restart production.