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B.C., U.K. electric vehicle makers to merge

American law firm investigating if merger would be fair to ElectraMeccanica shareholders
The ElectraMeccica Solo was recalled and discontinued

ElectraMeccanica (Nasdaq:SOLO), a B.C. headquartered company that developed a single-person, three-wheeled, battery electric car, which was recalled and discontinued earlier this year, is merging with a private British company that makes electric trucks.

An American law firm says it will be investigating whether the deal is fair to ElectraMeccanica shareholders, who will end up owning 23.5 per cent of the new merged entity.

ElectraMeccanica yesterday announced a merger with the private U.K. company, Tevva, which makes electric trucks. Under the proposed merger, ElectraMeccanica shareholders would own 23.5 per cent of the newly merged company, which would be known as Tevva, and current Tevva shareholders would own 76.5 per cent, on a fully diluted basis.

“The combined company expects to have a cash balance of approximately $70 - 80 million, with debt of approximately $26 million,” ElectraMeccanica said in press release.

Founded in Vancouver, ElectraMeccanica developed an electric battery-powered, three-wheeled single vehicle called the Solo.

Last year, the company commissioned a new manufacturing plant in Mesa, Arizona. But the company has run into problems with its vehicle, which it ended up recalling.

ElectraMeccanica’s shares peaked at US$10.81 per share on November 20, 2020, and then gradually fell until they were below $1 per share around the end of 2022. The company's shares traded at US$0.87 per share August 15.

In its annual financial statements for the period ending December 2022, the company reported revenue of US$6.8 million and a net loss of US$124 million.

In an August 15 letter to shareholders, ElectraMeccanica CEO Susan Docherty talked about the challenges the company has faced.

“At the end of last year, we commissioned a new manufacturing facility in Mesa, Arizona and continued selling our three-wheeled electric vehicle (EV), the SOLO,” she wrote.

“Yet: the business struggled under the burdens of an unsustainable cost structure; an unprofitable contract manufacturing relationship with Zongshen; and an addressable market that, while large, was too expensive to capture. So, we made hard, but necessary, decisions. 

“We streamlined operations, staff and costs; ended the manufacturing agreement with Zongshen; and recalled and then discontinued the SOLO. We also began to innovate – signing agreements to leverage the Mesa, Arizona facility to assemble others’ EVs. All the while, we carefully and relentlessly considered the best use of our still-strong balance sheet to create shareholder value.”

According to a release, the attending directors for both companies unanimously approved the merger. But Halper Sadeh LLC, an investor rights law firm, says it is investigating the ElectraMeccanica-Tevva merger proposal.

“The investigation concerns whether ElectraMeccanica and its board violated the federal securities laws and/or breached their fiduciary duties to shareholders by failing to, among other things: (1) obtain the best possible consideration for ElectraMeccanica shareholders; and (2) disclose all material information necessary for ElectraMeccanica shareholders to adequately assess and value the merger consideration,” the law firm says in a public notice.

“On behalf of ElectraMeccanica shareholders, Halper Sadeh LLC may seek increased consideration for shareholders, additional disclosures and information concerning the proposed transaction, or other relief and benefits.”

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