In general I've been supportive of Arcimoto's attempt to design and market an electric three-wheeled motorcycle, which they call the FUV, Fun Utility Vehicle. It does indeed look like fun, but this doesn't take away from the fact that the company is on shaky financial ground.
(You can see my previous posts about this effort by clicking on the Arcimoto category in the right sidebar. I have an early pre-order number of #129, so I've been following Arcimoto for quite a while.)
But yesterday Arcimoto did something that strikes me as ethically dubious -- a new last-minute stock offering announced after the markets closed on Friday, which requires investors to wire money by 5 pm EST on Monday if they want to buy shares via this offering.
This is after Arcimoto also announced yesterday in a third quarter earnings report that "our current resources are only sufficient to fund our intended operations through the end of November 2018."
Here's how I described my concerns about this stock offering in posts on the Facebook Arcimoto FUV Fan Club page.
First post was about the third quarter earnings report.
Well, as was suspected, Arcimoto is on shaky ground financially. The third quarter earnings report says they only have enough cash to last through November 2018. Excerpt:
"Total revenues in the third quarter of 2018 were $8,000 as compared to no revenue in the third quarter of 2017. Sources of revenue in the third quarter of 2018 were $8,000 from the sale of merchandise and metal fabrication revenue.
The Company incurred an operating and net loss of $3.2 million, or ($0.20) per share in the third quarter of 2018, compared to an operating and net loss of $0.7 million, or ($0.05) per share in the third quarter of 2017.
The Company had $2.4 million in cash and cash equivalents and $0.8 million in short-term investments as of September 30, 2018, compared to $2.1 million cash and cash equivalents and $5.2 million in short-term investments as of June 30, 2018. As explained in more detail in our Quarterly Report on Form 10-Q for the periods ended September 30, 2018, our current resources are only sufficient to fund our intended operations through the end of November 2018."
Second post was about the new stock offering.
At the risk of being called a negative Arcimoto "boo-bird," I've got to say it like I see it. The company's weekend stock offering of up to 2,500,000 shares at $3 a share strikes me as ethically dubious (at best). Here's why I think this way:
(1) The subscription (sales) agreement says that the price will be the highest of $3 or the closing price today, November 16, which was $2.94. So Arcimoto is asking investors to pay more than the last market price.
(2) Payment has to be wired to the company no later than 5 pm EST on Monday, November 19. There's a good chance the market price of Arcimoto stock will be less than $3 by that time.
(3) Why the rush to get the money wired so fast? Seemingly because Arcimoto wants to get some money committed for shares over the weekend before the markets have a chance to digest the fact that Arcimoto says it will run out of cash by the end of November.
Note: if you've ever wired money, you'll know that once it is sent, it can't be retrieved. It isn't like a check that you can stop payment on. So this is another reason I'm suspicious of this scheme. Arcimoto wants the money before people can see what happens to the stock price next week.
(4) If someone wants to buy more Arcimoto stock, here's a suggestion: wait until next Tuesday. See what happens to the stock price on Monday. There's a good chance the price will be less than the $3 Arcimoto is demanding for the special stock offering unveiled today.
This scheme just feels wrong to me. It smacks of desperation. Arcimoto has known for months that it was running out of money. Likely it has tried to raise the $7.5 million of so from a variety of sources: banks, venture capital, institutional investors, etc.
Now time is running out, so it appears that Arcimoto is hoping to be bailed out by individuals who want very much to buy a FUV.
But these individuals are at considerable risk of paying $3 per share for stock that could be worth much less, even close to zero, before too long -- if Arcimoto isn't able to finalize design of its FUV and make a lot of retail sales.
I'm just speaking for myself, obviously. That said, this last minute weekend scheme makes me very reluctant to buy a FUV, if this is ever possible. Up until today I've felt that Arcimoto had high ethical standards. That feeling is much diminished now.
Third post was about risk factors in the prospectus.
I want to add this advice to prospective buyers of the new stock offering. Be sure to scroll down the offering document and carefully read the "risk factors" in the prospectus. Some are more or less boilerplate, but the first one talks about how Arcimoto is running out of money fast and may not be able to continue operations if enough stock isn't sold. I've copied it in:
"We may not sell all of the common stock we are offering, and we may not raise enough capital from the sale of our common stock to address our short-term cash flow needs or adequately fund and execute our developing growth strategy.
There is no minimum amount of our common stock we must sell in this offering. Accordingly, investors will bear the risk that we will accept subscriptions for far less than the maximum amount of shares offered.
In that event, we will be unable to successfully complete all of the anticipated uses of the net proceeds of this offering. The financial notes to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, contain an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern and the depletion of our cash as of approximately the end of November 2018.
If we raise less funds than planned, we might not be able to address our short-term cash flow needs and continue operations.
Even if we can continue our operations, if we raise less funds than planned, we might be unable to execute our developing growth strategy as planned and our prospects, business, financial condition, and results of operations could be adversely affected, all of which would have a negative impact the return on your investment in our common stock."