Shell buys EV-charger operator Volta for pennies on the dollar

Volta, the San Francisco–based EV-charging-station company that raised $275 million from venture capital investors and reached a market valuation of $2 billion after its 2021 public-market debut, announced Wednesday that it will be acquired by oil major Shell at a price of $169 million.

It’s the latest EV-related company to see once-high-flying hopes of growth, fueled by a special-purpose acquisition company (SPAC) entry into public equity markets, soured by the harsh realities of a high-cost business with years to go before profitability beckons.

Volta has built a network of more than 3,000 public sites that combine EV chargers and video-advertising screens, and it has a pipeline of more charging projects in the works.

Shell’s purchase price of 86 cents per share, while an 18 percent premium over Volta’s share price at the close of Tuesday trading, is less than one-tenth the value that Volta’s shares briefly reached after its August 2021 merger with SPAC TortoiseCorp II. Shell’s acquisition price is a little over half of the roughly $300 million Volta raised as part of its public offering.

“The shift to e-mobility is unstoppable, and Shell recognizes Volta’s industry-leading dual charging and media model delivers a public charging offering that is affordable, reliable, and accessible,” Volta’s interim CEO Vince Cubbage said in Wednesday’s statement.

But ​“while the EV infrastructure market opportunity is potentially enormous, Volta’s ability to capture it independently, in challenging market conditions and with ongoing capital constraints, was limited,” he said.

Cubbage took the interim CEO role in June, three months after CEO and founder Scott Mercer and president Chris Wendel resigned abruptly amid slowing growth and mounting losses. The company laid off over half its employees, and in November reported a third-quarter loss of $42.5 million on revenue of $14.36 million with only $15.6 million in cash available.

The cash crunch left Volta with few options. Wednesday’s acquisition announcement noted that Shell would provide Volta with loans to support the company until the planned acquisition closes in the first half of 2023.

Mercer founded Volta in 2010 with the idea of making money on EV charging by selling advertising on the digital displays embedded in its chargers and offering EV drivers free charge-ups. Volta sited its chargers at high-traffic commercial sites such as supermarkets, shopping malls and sports arenas. It also had contracts with utilities including Southern California Edison and DTE Energy in Michigan that were using its analytics software to assess high-value EV-charging sites.

“Our business model is to try to undercut competitors on cost and to drive business to our site partners,” Mercer told Canary Media in an interview shortly after the company went public via SPAC in August 2021. He also highlighted the long-term view, saying, ​“You don’t think about the value of that property today. You think about how the value of that property will evolve over the next 10 years.”

The chicken-and-egg challenge of EV charging as a business 

Spending now to make money later is common in the business of building public EV-charging networks ahead of widespread demand for their services. Industry analysts forecast that EV sales will grow rapidly over the coming decade to reach as much as half of all new-car sales by 2030. Having enough public chargers available to serve those EVs is seen as a prerequisite for the market to grow.

But at present, there aren’t enough EVs on the road to use public EV chargers often enough to pay back the costs of deploying them. That means the companies deploying those chargers will be spending more money than they can expect to earn from their networks for some time to come.

“It is very hard to make money from EV charging when barely 1 percent of U.S. cars on the road are electric,” Pavel Molchanov, director and equity research analyst at Raymond James & Associates, told Canary Media.

Developers of EV-charging stations ​“simply cannot generate much revenue, now or at any point in the near future,” he said. As these companies invest heavily in building out their charging networks, ​“the name of the game becomes having plentiful access to capital.”

Some of the country’s biggest EV-charging providers have a ​“big brother” to fund this loss-making expansion, Molchanov said. BP pulse is the fleet EV-charging arm of U.K.-based oil giant BP, for example, while Electrify America is funded by Volkswagen’s $2 billion Dieselgate settlement agreement, although it raised $450 million more from VW and Siemens last year.

Shell, which also bought European EV-charging-network provider NewMotion in 2017 and North American charging-network startup Greenlots in 2019, will presumably play this big-brother role for Volta.

But ​“for standalone companies…there is no real alternative to equity and debt financing,” Molchanov said — and rising interest rates and the market’s shift away from investing in growth stocks have hampered the opportunities for EV-charging operators on both those fronts, he added.

Two of the largest public EV-charging providers in the country, EVgo and ChargePoint, have both seen their share prices decline since going public via SPAC in these perilous economic conditions, albeit not to the extent that Volta has.

ChargePoint, which went public at a $2.4 billion valuation in February 2021, has seen its share price fall from a post-SPAC peak of just over $40 per share to $11.94 per share at the close of trading Wednesday. ChargePoint in October reported a third-quarter loss of $84.5 million on revenue of $125.3 million with $397.6 million in cash.

EVgo, which was valued at $15.10 per share after its $2.6 billion SPAC in July 2021, was trading at $5.77 per share at the close of trading Wednesday. EVgo in November reported a third-quarter loss of $50.9 million on revenue of $10.5 million with $300.7 million in cash.

Blink Charging, the company that’s built a nationwide charging business from the assets of bankrupt EV-charging provider Ecotality, went public in 2018 and saw its shares reach a high of more than $50 in 2021 to $13.25 at the close of trading Wednesday. Blink in November reported a third-quarter loss of $25.6 million on revenue of $17.25 million, with $57 million in cash.

All of these companies have been expanding rapidly and inking multiple deployment deals with automakers and corporate customers, and none are facing the cash crunch that Volta struggled with.

Nor have any of these EV-charging companies undergone the trials and failures of many high-profile EV manufacturers that went public via SPAC mergers over the past two years, such as scandal-ridden Nikola Motors and its battery partner Romeo Power, or now-bankrupt Electric Last Mile Solutions.

Federal EV-charging incentives, such as the $7.5 billion in grants from 2021’s infrastructure bill and tax credits in last year’s Inflation Reduction Act, are expected to provide an additional boost to EV-charger economics, as are billions of dollars in state and utility funding.

But the near-term struggle for EV-charging developers to raise capital could crimp growth in a sector that must grow even faster than it has been to promote the switch to electric vehicles. A quick shift to EVs is needed to cut transportation-sector carbon emissions rapidly enough to keep the country on track to halving overall emissions by 2030, as the Biden administration has pledged under the Paris climate agreement.

Research and analytics firm Atlas Public Policy forecast that the U.S. will need to invest $87 billion in EV charging by 2030 to support the Biden administration’s goal of meeting half of the country’s demand for new cars with EVs by decade’s end. As of September, Atlas had tracked $6.4 billion in private-sector equity and debt financing for U.S. EV charging.