Following the termination of its proposed merger agreement with Tevva, Roth MKM analyst Craig Irwin has lowered his price target on Electra Meccanica Vehicles (Electra Meccanica Vehicles Stock Quote, Chart, News, Analysts, Financials Nasdaq:SOLO).
On October 4, SOLO issued a press release saying it had terminated the previously announced arrangement with Tevva due to “multiple incurable breaches of the agreement by Tevva, including failures by Tevva to disclose to ElectraMeccanica material information about Tevva.”
The analyst summarized the development.
“Electrameccanica has terminated the proposed merger with Tevva, with SOLO management citing incurable breaches of the merger agreement,” he wrote. “The $6m bridge loan facility extended to Tevva in August 2023 is repayable to nElectrameccanica no later than Jan 2, 2024. We expect mgmt at SOLO to actively pursue other opportunities for business diversification.”
In a research update to clients October 5, Irwin maintained his “Neural rating but lowered his price target from $0.75 to $0.57.
“Potential variance from our price target could come from execution of the strategic pivot of the business either moving faster or slower than expectations,” the analyst cautioned. “The execution of outsourced manufacturing agreements will be a major driver of near-term revenue, so we will watch progress here carefully, as this could drive material variance either below or ahead of estimates. Investors in Electrameccanica will face risks related to the company’s access to capital, which could introduce volatility to the stock. The company also faces typical competition from OEMs in adjacent markets, where many have significantly greater resources. If Electrameccanica’s products were found to have a flaw, this could drive a material warranty expense, and negatively impact the brand.”
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