Uncertainty about its survival | Exit from the stock market for Lion Électrique

Lion Électrique’s warning of “significant uncertainty” looming over its future is causing concern. The manufacturer of school buses and electric trucks was experiencing its worst trading session of the year in addition to seeing its stock hit a new low.

A sign that investor confidence was shaken, Thursday afternoon, the title of the Quebec company dropped 24%, or 19 cents, on the Toronto Stock Exchange, to trade at 60 cents. The stock temporarily traded at 58 cents, its lowest price ever on Bay Street.

Presenting its third quarter results on Wednesday, the Saint-Jérôme-based manufacturer warned that its coffers could be dry within a year without a refinancing operation. By her own admission, Lion recognizes that she might fail in her attempts to find money.

“This warning is troubling,” said analyst Benoit Poirier of Desjardins Securities, in a note sent to his clients. We prefer to remain on the sidelines until financial results are less volatile and the financing outlook is clearer. »

Not just about money

Leo’s challenges go beyond its financial reserves. The company must also obtain leniency from its short-term lenders to keep its head above water.

A first deadline is fast approaching, on November 15. This date marks the expiration of a period of relief from restrictive covenants – for example the level of liquidity to be maintained in the coffers – for a loan of 117 million US dollars taken out with a banking syndicate formed by the National Bank , the Desjardins Movement and the Bank of Montreal.

“Without an agreement, the banking union will have recourse,” explains Carl Brousseau, associate professor at the School of Accounting at Laval University. We will consider a default situation. What does this mean? We don’t have the agreement. It will be up to the lenders to decide. »

It was not possible to speak with the founder and CEO of Lion, Marc Bédard, on Thursday. The company indicated that the latter was not available for interviews. By email, the manufacturer did not want to specify what could happen if it does not reach an agreement with its banking union over the next week.

In another file, a loan of 22.6 million US dollars taken out from the Caisse de dépôt et placement du Québec (CDPQ) and the Quebec firm Finalta Capital matures on November 30.

As of September 30, which marked the end of the third quarter, Lion had access to approximately US$27 million in liquidity.

“With limited options and a cash burn of more than US$20 million per quarter, Lion is in a delicate position,” said Rupert Merer of National Bank Financial.

At CIBC World Markets, Kevin Chiang is not much more optimistic.

Despite the numerous measures deployed by the Quebec company to reduce its expenses, which have notably resulted in several waves of layoffs, the analyst believes that the continuation of Lion’s activities depends on many factors. The slope to go back up is steep.

Tumultuous year

The last year has been trying for Leo. Like other players in the transport electrification sector, the slower-than-anticipated shift had the effect of slowing down orders, particularly for electric trucks.

A weight loss regime was put in place, which resulted in waves of layoffs and layoffs in Canada as well as the United States. Lion’s workforce has shrunk to around 750 employees.

In addition, in the rest of Canada, school bus deliveries are slow. Lion blames this situation on the administrative burden of Infrastructure Canada’s Zero Emissions Transit Fund (ZFTF) to explain the slowdown in school bus deliveries.

This program can cover up to 50% of costs when a school carrier electrifies its fleet. Lion believes that the delays are too long before school transporters can know how much they will be entitled to in financial support, which slows down its deliveries.

Half of Lion’s order book is dependent on the FTCZE. The situation concerns the International Association of Machinists and Aerospace Workers (IAMAW), which represents workers at the Saint-Jérôme factory.

“It would be ridiculous to see jobs and a company disappear over an administrative issue,” worried Éric Rancourt, Quebec representative of the union organization. We ask the government [fédéral] to show leadership on the file by correcting the program’s shortcomings. »