EV Charging Station Company Files For Chapter 11 Bankruptcy

Ask someone to imagine the future of transportation. They’d probably imagine one where cars don’t run on gas. You can’t blame them. Everyone sees electric vehicles as the next step in human development. But they’ve been taking losses after losses.

Just recently, a company that sets up charging stations for electric vehicles has filed for bankruptcy. The reason? Charge Enterprise owes too much money, and it may be due to incompetence.

The State Of The EV Industry

In theory, electric vehicles should be taking over the automobile industry. They’re safe for the environment, optimized, and futuristic. But sales show a different story. For example, there were only about 1.2 million cars sold in 2023.

That number may seem impressive but it only accounts for 7.6% of vehicle sales in the US. How come? People don’t find their performance appealing, especially when you can get something similar for a cheaper amount.

So, What Happened To Charge Enterprise?

This poor performance in the EV industry has caused some businesses to struggle with money. The most recent example is Charge Enterprise. The company is in charge of manufacturing the charging stations for these vehicles.

Sadly, Charge Enterprise filed for a prepackaged Chapter 11 bankruptcy in the U.S. Bankruptcy Court. Fortunately, the court document shows they don’t plan to completely end their services.

Charge Enterprises Will Transfer Ownership

Alongside the bankruptcy details, the court document shows that Charge Enterprise plans to switch ownership. This power goes to its prepetition lender Arena Investors once the court helps them sort their bills.

Some people speculate that the change in ownership will help the company stay active. However, they may have to rebrand, which is a common phrase after declaring bankruptcy.

The Company Owes A lot

Another reason why Charge Enterprise is handing over to Arena Investors is because they owe a lot of money. In November last year, Charge Enterprise was unable to recover close to $10 million worth of investment.

This failed investment happened because their investment adviser, Korr Acquisition Group, breached their contract. What precisely did Korr do wrong?

Korr Failed To Make Some Investments

Charge Enterprise entrusted Korr with finding new ways to expand its finances. But strangely, Korr refused to invest in Charge common stock. This purchase was a security agreement set in August last year.

This unexpected withholding of investment money made it difficult for Charge Enterprise to pay the debt they owe Arena Investors. Shortly after missing their payment, Arena sent the company a letter of default.

Charge Sues Korr

Charge Enterprises’ money situation doesn’t end with the lawsuit. Just eight days after the new year, they filed a lawsuit against Korr and its founder. For now, the New York Supreme Court will handle the case, but what are the allegations?

The New York debtor accuses Korr of breaching their contract, unjust enrichment, fraud, and other claims. As compensation, Charge wants a brief restraining order on Korr plus $15 million in damages.

Fisker Is Also Struggling Because Of Incompetence 

As previously mentioned, sales are down in the EV sector. Incompetence seems to be the primary problem. One good example is Fisker (FSR), an EV manufacturer.

Fisker told the Securities and Exchange Commission that it would file its 10-K annual report by December 2023. However, their new accountant couldn’t handle the document, causing the company to be several months overdue.

They Tried To Liquidate At First

Before filing for bankruptcy, Charge contacted Piper Sandler for help in January 2024. They needed assistance to sell all of their non-debtor subsidiaries through a bankruptcy sale. 

That means they would forfeit ownership of services like their fleet, wireless, electrical contracting, and electric vehicle charging. However, Charge quickly changed their mind.

Selling To Arena Investors Was The Best Option

Selling off its assets would have helped Charge Enterprise cover its debt. But at the same time, it would mean curtains down for the brand. So, they held a meeting and decided selling to Arena Investors was the best idea.

Charge will also need $10 million in debtor-in-possession financing for the prepetition lenders. This also grants them access to $4 million on interim order approval and then $6 million in final DIP order.

What Arena Investors Get In Return

Once the court cleared all the papers, Arena Investors got complete ownership of Charge Enterprises’ newly arranged stock. It will also take over its general unsecured claims. But for preferred and common equity, that’s out of bounds.

The court papers show that Charge aims to confirm the bankruptcy case on April 24. Afterward, Arena investors would be in charge.

Charge Pioneered Clean Energy

Many find Charge’s bankruptcy situation unfortunate considering how well they were doing. In August last year, they expanded their business to offer more charging services nationwide.

They even purchased Greenspeed Energy Solutions, which is a provider of charging infrastructure, solar energy, and power storage. The entire acquisition cost $15 million.

Even Stellantis (STLA) Wanted To Become Partners

In the same month, Stellantis (STLA) reached an agreement with Charge. They were supposed to become partners in making EV installations. What makes this deal perfect is that it would have all does Charge to harness STLA’s network of 2,6000 dealers.

Unfortunately, financial instability made Charge Enterprise put the partnership on hold. If Korr had done their job, they’d probably be on the fast track to success.

Now, We Wait…

For now, everything has been set in motion. Charge has filed for bankruptcy and is expected to conclude it in April. In that case, Arena investors will take over 100% of the debtor company due to how much they owe.

Let’s not forget Korr Acquisition Group. Charge Enterprise sued them for breaking the contract and trying to enrich their own pockets. If things go in Charge’s favor, the court may force a compensation of up to $15 million.