embark

Autonomous trucking company Embark has laid off over two-thirds of its employees and is exploring a sale of assets as well as liquidation, as market sentiment toward loss-making companies continue to sour.

Embark has closed offices in South California and Houston, Texas – founded by Alex Rodrigues and Brandon Moak in 2016, the company achieved the milestone of a cross-country run of an autonomous truck two years later.

While tech stocks crashed in 2022 and the tech-heavy Nasdaq Composite lost 33%, newly listed tech names performed even more poorly.

For instance, the Renaissance IPO ETF, which invests in a portfolio of newly-listed companies and is overweight in the tech sector, fell 57% in 2022.

The performance of de-SPACs was even terrible and the AXS de-SPAC ETF lost around three-fourths of its value in 2022.

The ETF has since liquidated which is reflective of the trouble that de-SPACs have faced over the last year.

Embark incidentally went public through a SPAC reverse merger in November 2021 only – market sentiments towards SPAC mergers started to sour in the back half of 2021 only.

The company managed to get only about half of the funds that it was originally targeting from the merger.

However, the $314 million proceeds that it received as part of the merger, could not sustain it beyond a few quarters.

In his email to Embark employees, Rodrigues said that markets “have turned their backs on pre-revenue companies, just as slipping manufacturer timelines delayed the prospect of scaled commercial deployment.”

Embark Stock Plunged amid the Tech Sell-off

Notably, Embark managed an initial valuation of $5 billion after the merger. However, as the Fed embarked on its most aggressive tightening in decades, loss-making and pre-revenue companies fell out of favor with markets.

The stock fell in the penny stock category and faced a possible delisting due to non-compliance with the minimum listing requirements. To meet the minimum exchange listing requirements the stock should have a closing bid value of $1 or higher for 10 consecutive trading days.

As its stock price plunged, the company did a 1-for-20 stock split. However, despite that, the stock price is still below $5 which is borderline for penny stocks. The company’s market cap is now a mere $90 million.

Notably, many other de-SPACs including Paysafe did reverse stock splits to meet the minimum exchange listing requirements. SPACs usually IPO at $10 and given the current macro environment many fell over 90% and plunged below $1.

Embark Explores Liquidation as Markets Sour

Coming back to Embark, in its SEC filing the company said that on March 1 “the board approved a process to explore, review and evaluate a range of potential strategic alternatives available to the Company.”

It added that efforts to explore the commercialization of its technology in alternate markets and a sale of the company did not bear fruits.

Embark listed “exploring alternative uses of the Company’s assets to commercialize its technology, additional sources of financing, as well as potential dissolution or winding up of the Company and liquidation of its assets” as the possible alternatives.

Autonomous Driving Startups Face the Heat

Autonomous driving startups have been facing the heat as markets question their ability to commercialize the technology.

In October 2022, Argo AI, an autonomous driving startup backed by Ford (NYSE: F) and Volkswagen shut down. Ford wrote off its investment in the company and took a non-cash charge of $2.7 billion.

Nuro, an autonomous driving startup backed by Alphabet, Tiger Global, and SoftBank announced that it is laying off a fifth of its workforce as it strives to save cash amid the perennial cash burn.

Tesla’s autonomous driving is also running behind schedule and the company recently announced a recall related to the software.

Meanwhile, Waymo – which is backed by Alphabet – last month said that it has received permission to run its autonomous cars in Los Angeles.

Waymo is Testing Driverless Cars in LA

Earlier this year, Google’s parent company Alphabet (NYSE: GOOG) slashed over 12,000 positions which also impacted some roles at Waymo.

The layoffs came a couple of months after its key stockholder TCI Fund Management called upon the company to cut costs.

TCI said that Alphabet stock is undervalued and called upon the management to scale up its share repurchases. Most Wall Street analysts are also bullish on the stock. We have a guide on how investors can buy Alphabet stock.

As for Embark, the company had $190 million worth of cash and cash equivalents at the end of Q3 2022. The stock is trading lower in US premarkets today and looks set to extend its losses even further.

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