An electric truck manufacturer that was awarded $32 million from President Obama’s stimulus program has informed one of its investors that it is on the verge of bankruptcy, if it did not raise $4.5 million by Friday and $10 million by the end of October.
The troubled saga of Smith Electric Vehicles should be particularly sickening for taxpayers because it sprouted out of a similar failed company, of the same name, in Great Britain. Smith, as part of the U.K.-based Tanfield Group, stumbled out of Europe and re-established itself in Kansas City – opportunistically at the time that President Obama was rolling out his plans to “stimulate” the “green” energy sector in early 2009.
More on that momentarily, after a look at Smith’s current desperation. According to reports from investment Web sites in England, Tanfield – which currently holds a 5.8 percent ownership stake – was notified last week that Smith Electric needs an immediate cash infusion.
“[Smith Electric} has limited cash on hand to meet pending obligations,” a statement on Tanfield’s Web site said. “If the Board of Smith fails to raise $4.5 million on or about October 2nd then the company is likely to be forced to seek protection under U.S. bankruptcy laws or close down its operations.”
No news emerged at the end of last week about the status of the company or its fundraising, but in the 6-7 years of its U.S. existence, sales revenues and investment have fallen short of its expenditures. Indeed Smith arrived in Missouri from the U.K. under a cloud.
Selling itself as a manufacturer of electric-powered box trucks (primarily) designed for businesses’ product deliveries in urban settings that require only short routes, Smith landed in Kansas City in January 2009. But that arrival was no splash, but a reboot of Smith-U.K, which had functioned as a subsidiary under Tanfield Group.
The company’s (Tanfield’s) financial picture had tumbled in 2008, after previous fawning over its “Green” electric delivery trucks and praise from authorities such as former Prime Minister Tony Blair. By April that year experienced investors grew concerned, with one commenting to the London Telegraph, “There seemed to be no major reason for the shares to sink, as the company’s figures were still good, but suddenly over a few days the price dropped dramatically.”
Later the same month investors wondered if Tanfield was “more hype than reality,” the newspaper reported. Shares had dropped 20 percent in one week, and analysts were troubled by claims that its Smith vehicles were ordered by major customers, which couldn’t be verified. By July 2008 Tanfield’s stock price had “collapsed” (scroll down at link) and was harming other holdings of its founder, Roy Stanley, and his ability to raise funds for his other business ventures. In December 2011 NLPC documented the “circus” nature of the speculative Alternative Investment Market in London, upon which Tanfield was traded.
According to reports in The Telegraph, the London Stock Exchange investigated the company in July 2008 after a “major profits warning” led to the loss of 80 percent of its stock price in less than a day. In the course of one year, the company had lost more than 97 percent of its value, and the hit reverberated to Smith Electric’s suppliers. Tanfield’s accountants are also under investigation (now running five years) by the U.K. Accountancy and Actuarial Discipline Board, which confirmed last week that the inquiry is ongoing.
Upon this foundation, with no track record in the United States, the Obama administration saw fit to award Smith Electric-U.S. millions of dollars from American taxpayers. The Department of Energy granted the company $10 million in August 2009, and an additional $22 million in March 2010, ostensibly for its electric truck “demonstration program” in which it gave subsidies to buyers of its vehicles. Those giveaways to the “customers” turned out to be substantial, as NLPC reported in December 2011, with various grant and tax incentive programs helping offset nearly the entire cost of the trucks.
Alas, all that was insufficient, as Smith Electric at various times has announced new rounds of fundraisings and plans to attempt an initial public offering. A year ago it sold $11 million more in stock and engaged in a scheme to pay $340,000 for a majority stake in a small Colorado company, American Business Services, which ultimately was supposed to help it accomplish a reverse merger in which it would “gain access to capital without attempting an initial public offering,” according to the Kansas City Business Journal. Smith would then be able to do so, theoretically, because ABS is traded on something called the “Over the Counter Bulletin Board.” Obviously that scheme didn’t work.
Predictably – at least for those few who knew the history in England – the Smith Electric-U.S. venture has been a bust. Tanfield Group, with its 5.8 percent stake, won’t even pitch in to help save its investment. It was easy to see that the company was completely dependent on taxpayer funding and investment capital, and that there was no demand for its product, despite the “stimulus.”
The report from Tanfield Group last week appears to reflect its last gasps.
Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.