Onetime darling of EV world settles SEC charges for $11m
XL Fleet claimed a backlog of $220m
The story of Boston’s onetime multibillion-dollar EV startup, XL Fleet, ended with a whimper on Friday.
The Securities and Exchange Commission charged XL Fleet with misleading investors about its revenue prospects in the 2020 deal to take the company public by merging with a SPAC, or special purpose acquisition company. Investors have already paid a steep price, experiencing a loss of 99 percent by the time XL Fleet shut down its electric vehicle conversion business and was acquired by Denver-based Spruce Power last year.
Spruce agreed to settle the SEC charges on Friday, paying an $11 million civil penalty without admitting or denying guilt.
“It goes without saying that investors commonly rely on revenue projections when deciding how and where to invest, and that’s perhaps especially true for investment decisions involving early-stage companies in the SPAC market,” Mark Cave, associate director of the SEC’s Division of Enforcement, said in a statement. “By linking its bold revenue projections to misleading claims about the company’s historical performance, XL Fleet misled investors by inhibiting their ability to differentiate between credible facts and mere aspiration.”
XL Fleet was founded by Tod Hynes in 2009 with plans to convert gasolinepowered trucks and vans to electric powertrains. Working out of space above a garage in Brighton next to the Mass. Pike, XL developed batteries and motors it said could easily fit into existing trucks. The company hit a valuation of $4 billion days after going public, thanks in part to claims it had a $220 million backlog of business and forecasted 2024 revenue of $1.4 billion.
Short seller Carson Block, founder of Wall Street research firm Muddy Waters, blasted the projections in a March 2021 report that sparked the SEC’s investigation. And almost none of the forecast sales materialized, as XL Fleet’s revenue declined 23 percent to less than $16 million in 2021.
“It was just SPAC promoters trying to capitalize on the desire of all these new retail investors to own the next Tesla,” Block told the Globe in an interview last year.
Hynes left the company in 2022 before the Spruce Power acquisition.
The SEC traced the misleading numbers to a database that XL Fleet’s salespeople used to record sales opportunities. Of the purported $220 million backlog, only $20 million reflected actual sales or purchase orders, the SEC said. Of the remainder, $61 million had been entered in the database as having a 25 percent likelihood of becoming an actual sale and $133 million was listed with only a 5 percent chance of coming to fruition.
The 5 percent group “included potential customers who had not been contacted by XL Fleet’s salespeople, or who had been contacted for an indication of interest in XL Fleet’s products but had not responded,” the SEC noted. The pipeline also included potential business in California, even though the state had suspended XL Fleet’s application to sell its equipment there, the SEC said.
Spruce, which owns and operates solar power installations, said the $11 million penalty will be available to compensate XL Fleet shareholders for their losses.
“We are pleased to resolve these items that are unrelated to Spruce’s current management team or business plan. Having these matters resolved will better allow Spruce to look forward,” chief legal officer Jonathan Norling said in a statement.