Electric vehicle and self-driving startups worth a combined $75 billion today received some $50 million in Paycheck Protection Program loans—and some plan on keeping the money that was intended to keep small businesses afloat, Forbes reports.
PPP loans were intended to keep small businesses with fewer than 500 employees from dire financial straits and ensure their workers get paid during the coronavirus pandemic, but the funding was quickly exhausted, and many struggling small businesses got nothing as subsidiaries of larger businesses, businesses that could easily afford to ride it out, or straight-up grifters got their share.
Naturally, tech startups got their piece of the PPP pie, too. Whether they all should have will no doubt be hotly debated, but auto tech companies including Nio, Nikola, Canoo, Lordstown Motors, electrified trucking startup Hyliion, lidar tech company Luminar Technologies and Velodyne Lidar were all on the list, reports Forbes. Most of these have benefited from the “next Tesla” gold rush from investors looking to strike it rich on any company that can get ahead of an electric, self-driving future—regardless of how much that company reeks of vaporware.
Hyliion, Nikola and Luminar have since returned their loans, but some other car-tech startups intend to keep the cash. It begs the question: How much did these startup companies that were riding the car-tech hype investment train really need the help?
EV startup Canoo took $7 million in PPP loans, but probably wasn’t the small biz folks had in mind when the program was initiated. Per PitchBook data cited by Forbes, the company has raised over $1 billion in funding and was valued at $1.8 billion in a merger with Hennessy Capital Acquisition IV, which itself raised $600 million from investors. Canoo’s implied valuation recently surpassed $3 billion, yet a Dec. 4 filing quoted by Forbes says that the company has no intention of paying back the loan:
“During October 2020, Canoo submitted its application for forgiveness of the PPP Loan. Canoo has and intends to continue to use the PPP loan proceeds for purposes consistent with the provisions of the PPP and believes that such usage will meet the criteria established for forgiveness of the loan.”
Self-driving tech company Velodyne Lidar, which got $10 million in PPP cash, is a similar story. According to Forbes, Velodyne Lidar raised hundreds of millions of dollars in venture capital, raised about $400 million after its merger with Graf Industrial, and has since seen its stock valuation double to $3.5 billion. Its founder David S. Hall’s 59 million shares alone are worth over $1 billion. Yet per a Sept. 30 financial disclosure cited by Forbes, the company has not returned its PPP funds yet, and did not respond when Forbes reached out to them on the matter.
Same goes with electric bus startup and $10 million PPP loan recipient Proterra, which Forbes describes as “one of the most well-funded Silicon Valley EV startups ever.” Per PitchBook data cited by Forbes, it raised over $750 million from investors alone. A spokesperson told Forbes that the $10 million loan “supported our ability to maintain a full workforce as we’ve navigated the uncertainty caused by the COVID-19 pandemic,” but would not comment further on the matter.
Two of the highest-profile electric truck startups, Lordstown Motors and Nikola, both were on Forbes’ list of well-funded car tech startups who got PPP loans. Lordstown Motors took $1 million in PPP loans, and while it raised $675 million in August in a merger with DiamondPeak Holdings, Forbes reports that it recently told shareholders that it intends to keep its PPP cash.
startup Nikola took $4.1 million in PPP loans back when things were looking up for the company and its founder Trevor Milton was still in charge, per Forbes. Nikola did, however, return its PPP loans at the end of April, when it learned it was going public, according to a Securities and Exchange Commission filing.
Meanwhile, EV startup Nio’s PPP loan is a bit more like dealership mega-chain AutoNation’s insofar as it’s a big company which wouldn’t qualify for small business loans as a whole, but it was a company that could be divided into smaller chunks that do. It was Nio’s American subsidiary who applied for $5.4 million in PPP loan funding.
Perhaps this did save Nio from dire straits, though, as it entered 2020 having exhausted over $6 billion in investment and a stock price that had dropped by 80% from its first day of trading. The company even warned its investors that it might not be able to continue as a company much longer.
Nio said on its April 10 PPP loan application that it used the PPP cash to save 204 jobs, and the series of bailouts it took paid off massively, Forbes reports. The company raised over $1 billion from manufacturing and investment partnerships in China over the course of April and May. Its stock price rose from a low of $3 a share to $46 a share with a market capitalization of over $60 billion.
That being said, Nio is EV billionaire William Li’s publicly traded car company. As Forbes notes, Li is often referred to as the “Elon Musk of China.” Your local pub owner he is not—that is, unless your watering hole is a labor of love from someone worth $7 billion mostly from the value of their EV company stock. Nio, too, intends to keep the PPP cash, as a company spokesperson told Forbes that it intends to use the funds for “U.S. payroll, rental expenses, and utility bills.”
That being said, the more stable startups noted here actually have a better shot at meeting the Paycheck Protection Program’s strict requirements for forgiveness than, say, your neighborhood bar, as the New York Times reports in its explainer as to why some of the intended PPP loan recipients opted out of the program. Companies have to keep the same number of employees on at the same wages as they made before the pandemic. That’s much easier to do when investors are pumping millions of dollars into your startup than it is when you rely on customers who are less willing to spend extra money or do certain activities as the pandemic rages on.
Good luck bleeding any PPP loan funds back from any car tech startups that get outed as vaporware before the loan terms are up, though.
Correction: This story has been updated to note that Nikola returned its $4.1 million PPP loan earlier this spring.
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