Electric truck and bus maker Lion may need to save its coffers and is laying the groundwork in case it needs to take action, a move that’s fueling fears of dilution among shareholders.
Posted at 8:00 am
Updated at 08:06
The Saint-Jérôme, Laurentians-based company has just filed a prospectus with authorities that could allow it to raise up to $350 million. It could also raise as much as $125 million by issuing new shares.
That decision suggests Lion’s order book isn’t as resilient as we thought, said Laurentian Bank Securities’ Nauman Satti. The analyst adds that the company, which needs to finance the construction of factories, could need additional capital.
Although the timing of the share offering will depend on the pace of expansion and order book growth, the lack of major order announcements in recent months increases the level of risk associated with investing in Lion.
Nauman Satti, an analyst at Laurentian Bank Securities, in a note
A month ago, Lion’s backlog — 286 trucks and 2,136 buses — was about $600 million.
Nauman Satti points out that there are approximately $155 million in Lion’s treasury. The company also needs to receive $100 million in subsidies and has a $200 million line of credit.
However, the analyst adds, this line of credit can only be used for the company’s working capital, which limits its use.
This is a reminder that Lion needs approximately $185 million to build its manufacturing facility on American soil. It was to be financed in part by government grants and in part by the sale of the current facilities.
Citing inflationary pressures, the company said last February that its expansion projects in Mirabel and south of the border would cost it an additional $55 million.
“Lion has enough cash to meet its short-term financing needs, but without major orders, the challenge is likely to increase next year when production capacity increases from 2,500 to 22,500 vehicles per year,” says Nauman Satti.
This analyst expects a share offering next year.
Asked by The pressA spokesman for Lion responded that the company was not short of cash and that the prospectus was filed out of “prudence.”
When asked about the financial needs on the sidelines of an announcement in Laval two months ago, CEO Marc Bédard reiterated there was “nothing special”.
“Today we have access to a lot of cash,” he said in an interview with The press. There’s nothing special there. We even have an unused margin of 200 million. We continue to have significant liquidity. So, no, there is nothing special. »
Lion’s stock hit its lowest level since last spring’s IPO on Thursday. The stock fell 7% on Thursday to close at $5.73 in another volatile session.
Lion’s shares were worth more than $28 at their peak this past June. At the current price, the market value of the company is around 1 billion.
- Approximate number of people working for Lion