NEW YORK ( TheStreet -- Smith Electric Vehicles has backed itself into a corner and is hoping the IPO market will help it navigate its way out. The problem is that Smith could be the next Solyndra.
The Kansas City, Mo.-based company is a maker of commercial electric trucks and has never turned a profit. It is trying to raise $77 million and if Smith doesn't do this offering, it will not be able to operate after the third quarter of 2012, essentially running out of gas.
Revenues and orders are up, but since it costs so much to produce the vehicles, the price per truck is high. Smith has received millions from the Department of Energy, originally used for research, but the DOE has since changed that and insisted the money be used for customer incentives. The DOE is sensitive to helping pay for company development after guaranteeing over $500 million loans to solar panel maker Solyndra, which promptly went bankrupt.
The customers in the U.S. receive generous incentives to buy the trucks, anywhere between $55,000 and $94,000. Smith has $10.3 million in funding remaining in this program, but has applied for more. Considering the fate of Solyndra, it's hard to imagine the federal government sending more money to this company especially with the fiscal cliff looming. The absence of grants could send the company into a tailspin.It also doesn't help that the DOE audit of Smith in 2010 found "significant deficiencies" in their accounting. Smith managed to address the weaknesses and convince the DOE to resume payments in February of 2012. However, if a future audit finds more "accounting weaknesses," the payments may stop. Smith's problems started when it put the brakes on production in the fourth quarter of 2011 while shifting to new technology. In order to survive the switch, the company issued $30 million in convertibles that turned into preferred stock in November 2011. Then the company sold private placement shares to the tune of $15 million in early 2012. After that they borrowed $11.5 million from the $16.5 million in bridge notes they had entered into. So now they are up to their hub caps in debt and need this IPO bad. On top of that, Smith has never achieved positive cash flow and even after the offering, may need additional financing.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV