Running out of money after struggling to expand business
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Taiga Motors Corp., a Montreal-based maker of electric motorcycles and watercraft, filed for creditor protection this week in Quebec after struggling to expand its business.
The company was one of the first to move toward electrifying snowmobiles, and received a wave of investor interest as well as significant government support, but it was unable to translate that interest into a full-scale business.
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Taiga said the mild winter hurt its snowmobile sales and essentially ran out of money. It said it was Obtained creditor protection in the Superior Court of Quebec. Export Development Canada has given it $4.4 million in financing, of which it has drawn down $1 million, which should ease its immediate cash needs. Now, the company says it is looking for new investors or even a sale.
Here’s everything you need to know about her journey to protection under the Companies Creditors Arrangements Act (CCAA).
How did we get here?
It’s been a long decline for a company that began trading on the Toronto Stock Exchange in April 2021. and initial reports It was supposed to be worth hundreds of millions of dollars, and that summer its shares soared to more than $9 a share.
Its shares have recently hovered around 30 cents, giving it a market value of less than $9.7 million. Tyga said it expects the Toronto Stock Exchange to put its shares under review for delisting.
But Taiga has been in good shape this fall. At the end of the third quarter, the company said it had delivered a record 147 vehicles and had more than 2,750 pre-orders on its books. In addition to $5.8 million in cash, EDC has provided it with a $15 million secured loan to increase production.
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Taiga said in its application that:The companies had outstanding liabilities, on a consolidated basis, amounting to About $93.2 million.
The company’s products — an electric snowmobile and a jet ski-like electric watercraft — are “very well-liked” by consumers and industry reviewers, co-founder and CEO Samuel Bruno told analysts in November. He said the company has made strong progress in California, Texas and Florida, the three hotspots for adoption of electric boats and vehicles.
The plan was to invest more in sales and marketing to attract early adopters of electric equipment and corporate customers, such as resorts, who might buy fleets of its vehicles. As sales volumes increased, the company expected costs per unit to fall.
Bruno described the company as a sports company as much as it is a technology company, with the largest engineering staff in its class, and said it was on a mission to “revolutionize” the industry.
“Being an all-electric company has its benefits in terms of getting people to know the Taiga brand,” Bruno said at the time. “Our all-electric brand is important when our customers are looking for more sustainable options and choosing our products.”
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climate problem
If climate change and the energy transition have given Taiga its raison d’être, they have also proven to be part of its downfall. In April, the company said an “unusually mild winter” had caused snowmobile sales to fall more than expected.
With signs of a slowing economy emerging, the company announced it was halting production and cutting its workforce by about 70 employees. It also added that it would stop providing any future guidance.
In May, the company reported revenue of $5.08 million in the first quarter, representing a 194% quarter-over-quarter growth. It also sold 129 watercraft and 78 snowmobiles, for a total of 207 vehicles in the quarter.
But that was offset by a total loss of $3.67 million.
The overall loss reflects “production costs exceeding the realized selling price of the units during the quarter,” Luke Hanna, an analyst at Canaccord Genuity Group, said in a note.
According to Taiga’s website, its Nomad snowmobile starts at $21,999, and its watercraft models range from $25,499 to $33,999.
Bruno admitted that his snowmobile models cost more initially, but said lower fuel and maintenance costs keep the total cost of ownership below the industry average.
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In June, CFO Eric Busseres left the company to pursue an opportunity outside the motorsports industry.
What now?
The company said it would need to return to the Superior Court of Quebec “soon.” The company said it would need to make additional drawdowns on the $4.4 million loan from EDC, which would require court approval.
After that, it’s not clear what will happen next, though the company has indicated it is either looking for investors or a formal sale. Deloitte Restructuring Inc. will monitor the restructuring efforts under the CCAA.
Electric snowmobiles are becoming very popular, and leading companies in the industry, including Bombardier Recreational Products Inc. with its Ski-Doo brand, Start offering electric options Capable of “short distance travel” and at prices comparable to Taiga’s offerings.
Meanwhile, people in Nunavut I spent this winter testing the Taiga model. Under the harsh conditions of the Arctic, where temperatures can drop below zero for extended periods of time, battery life and range may decrease accordingly. Initial reports suggested that the 100km range could be halved under such conditions.
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In November, Bruno said on the company’s last earnings call that Taiga was refining its products and manufacturing approach to achieve efficiency. The company is also looking to sell its products in Europe, the Middle East and South America, in addition to North America.
He said the company has already invested heavily in technology and plans to release a number of updates to its model this year, including wireless updates to improve charging capabilities and the development of the sixth-generation powertrain.
This advancement in the electrification of motorsports could be somewhat beneficial as the rest of the industry looks to catch up if Taiga can successfully navigate bankruptcy protection proceedings.
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“Given the significant capital required to develop and grow its business, Taiga has incurred significant losses since its inception in 2015 and, in fact, has never reached profitability,” the company said in its filing. “In the absence of any investment in its business, it expects to continue to incur operating and net losses and use significant amounts of cash in its operations for the foreseeable future.”
• e-mail: gfriedman@postmedia.com
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