Vicinity Motor Corp V.VMC

VMC A few thoughts for 2024

[RealVal]

A few thoughts regarding VMC as we enter 2024:

-As of now I can identify only two "U.S. manufacturing plant located" companies that are producing "purpose built" class 3 base chassis ev commercial trucks for uplifting to the multiple different potential uses that companies and municipalities have (not including the Ford or GM conversions which while being competitors in some areas will not be in many and specialized box last mile delivery models which are really there for Amazons, Post Offices, etc).  If any of you guys know of any others please do let me/us know. I stand to be corrected.
- The two companies producing these models are Vicinity and Mullen Automotive.
- They both have opened new 100,000 ft plus assembly facilities in the past year and both are scaling their assembly of the class 3 trucks (both well over 100 trucks produced and growing monthly).
-Both have anchor 1,000 unit orders in place that they have started delivering on in the past few months from major auto groups (VMC's being Pioneer Group in Canada and Mullen's being the Randy Marion Group out of North Carolina).

But this is where I think the two separate:
- Vicinity has been selling and assembling vehicles for over ten years (transit buses into both the Canadian AND U.S. markets).
- Mullen assembled its first vehicles and generated its first revenues over the past 4-5 months (class 1 van and class 3 truck).
- Vicinity is focused and disciplined (maintain legacy diesel and LNG powered bus biz, while building sales for their ev version of same models AND growing the class 3 and potentially 4/5 ev truck channels).
-Mullen is trying to ramp up an ev car division, a light/medium truck model (Bollinger Motors) a battery manufacturing entity, a class 1 van model and their class 3 truck all at the same time.
-Vicinity has invested appr. 50 Million in the past 5 years to advance to its present point. It is effectively at ebitda breakeven, has 70 Mil in assets, only 14 Mil in long term debt and a net asset value of appr. 30 Mil.
- Mullen has burned through what is estimated to be appr. 960 Million to date and is still on a cash burn rate of appr. 34 Mil PER QUARTER to get to its current state.
- Vicinity has in place solid, stable, economically rational commercial financing (operating lines of credit and term debt) with major established banks (RBC and Export Development Canada or EDC) to facilitate its growth.
- Mullen's funding has been through brutal preferred share dilution that has culminated in a 22,500 : 1 share consolidation ( I am NOT making that up!) in the past year.  ie: a $10,000 investment a year ago is valued today at .45 cents!!!!!!!!!
- It gets worse for Mullen.  In the past week they just filed SEC papers stating that they have taken out a THREE MONTH term loan for 32 Mil with a repayment obligation at the end of that 3 months of 50 MILLION!!!!  (Once again I AM NOT MAKING THIS UP!!). An 18 Million premium to provide that capital for a three month period. Additionally there is interest at 10% on the 32 Mil for the 3 months that increases to 18% if Mullen defaults in the repayment at the end of the 3 months. The lender has a preferred security status. If you want to read something that is really entertaining (for us as VMC investors though likely sickening for Mullen investors) click on the following SEC link for details of the filing: https://www.sec.gov/Archives/edgar/data/1499961/000110465923128894/tm2333182d1_8k.htm

- The reason given for the loan is to "provide additional capital for the Company's manufacturing operations"...........

My takeaway, I like VMC shareholders' chances a lot better than Mullen's.  Really. I don't see how Mullen still exists in its current form 6 months from now. I think this latest loan shows how close to the end of the rope they are. That said there is a reasonable likelihood that these class 1 and class 3 assets with their manufacturing facility gets picked up by someone else, but that will take some time to sort out, hopefully to VMC's benefit from a time perspective.

The past couple years have been extremely challenging for all new tech related emerging entities ev or otherwise. Covid supply chain issues, dramatic inflation and subsequent interest rate increases and economic uncertainty have stifled development and market sentiment for all companies and especially these ones. Vicinity has not been immune to this, and its share price and market value has reflected this. Some has been there doing (Optimal partnership turned out less than Optimal... ), but most not. They had to work through what was in front of them.

By and large they have done that in a prudent and responsible manner.

VMC clearly needs to get going on establishing and building momentum with their nationwide dealer networks (both in Canada AND U.S) and scaling their assembly operational capacity.  Other competitors will undoubtedly come (U.S. market especially) over time. But VMC "at the moment" is the best positioned entity to capture significant parts of both the mid-sized transit bus market AND especially the class 3 commercial ev truck market in North America.

I have heard both Bill Trainer (VMC CEO) and John LaGourgue (VP Corp. development) say in investor presentations in the past couple months that they are at a "show me" time as regards investors and share price/company valuation.

In the last qr. Q & A they said the backlog on transit buses is 120. If they can ship 80 in 2024 at a conservative average of 350k/bus (cad $) that's 28 Mil.  Their backlog on class 3 trucks should still be close to 1000. If they only ship 600 at 132k cad $ (100k US$) that's 79.2 Mil. Add in 5 Mil for parts sales and you've got 113 Million cad 2024 Revenue. Do more great. Do this and we will see (and so will the market) that VMC is going in the right direction.

So Bill and John are right . Every quarter now and 2024 overall is all about execution.

It's go time Vicinity. SHOW US!

Wishing everyone a profitable 2024.