Shares of Electric Last Mile Solutions (NASDAQ:ELMS) are down a massive 33% today following news of executive changes at the electric vehicle company. ELMS stock is also down on news the company will restate its earnings.
So what else do you need to know?
Today’s big drop brings the year-to-date decline in ELMS stock to 47%. And, at $3.70, it can now be considered a penny stock. The latest decline comes as the company, which focuses on commercial electric vehicles, announced several senior executive changes. These include the resignation of the chief executive officer amid plans to restate the company’s earnings.
What Happened With ELMS Stock
In a news release, Electric Last Mile Solutions said that CEO James Taylor has resigned from the company and that Shauna McIntyre, a member of the company’s Board of Directors, has been named interim CEO and president. Additionally, Brian Krzanich has been appointed non-executive chairman of the board, replacing Jason Luo, who has also resigned.
The shake-up comes after an investigation by a special committee of the Board of Directors led to plans for Electric Last Mile Solutions to restate several earnings reports. The financial statements in question cover the periods from Dec. 31, 2020 through to Sept. 30, 2021. The investigation also found evidence of several inappropriate stock awards to company executives.
Why It Matters
Few things cause greater doubt in a company than a CEO resignation and restatement of earnings. Taken together, these developments make Electric Last Mile Solutions look, at best, to be poorly run, and, at worst, as though fraud may have been committed.
Today’s steep pullback in ELMS stock shows that investors no longer have confidence in shares. The problems also play into the narrative that many electric vehicle startups are poorly run and highly speculative, and that investors who put money into these stocks are likely to incur substantial losses.
What’s Next for Electric Last Mile Solutions
It will take a lot for Electric Last Mile Solutions to regain the trust of investors. The company’s Board of Directors appears to have done the right things by changing leaders and announcing that they will restate earnings. But the damage to the company’s reputation could be long-lasting. As such, investors should avoid ELMS stock or sell any position they have in the company before things get even worse.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.