Taiga Motors Corp. TAIG-T is trying to secure a lifeline from two key investors as the Canadian maker of electric snowmobiles and personal watercraft acknowledges it is in “serious financial difficulty” and has almost run out of cash.
The manufacturer said Friday that it intends to raise $40.2-million through a private placement of secured convertible debentures negotiated with Northern Private Capital (NPC), its largest shareholder, and Investissement Québec (IQ), the Quebec government’s investment arm. NPC will subscribe for $25.2-million while IQ will take $15-million.
Taiga said it has applied to the Toronto Stock Exchange for an exemption to rules requiring shareholder approval of various elements of the private offering on the basis that it is in “serious financial difficulty” and needs the money “immediately” for working capital and general corporate purposes. It says there is no time to hold a meeting of shareholders.
Led by founder and chief executive Samuel Bruneau, Montreal-based Taiga is trying to revolutionize the powersports industry with its all-electric vehicles – bringing an environmental sensibility to a sector historically hooked on loud revving engines.
Two models are currently being manufactured and shipped out to buyers as Taiga scrambles to scale up its production in the wake of serious manufacturing challenges, including what the company says was the failure by certain suppliers to deliver on contracts.
Taiga on Friday disclosed preliminary fourth-quarter results showing it managed to build and deliver 104 vehicles for all of 2022, and had $8.3-million of cash at the end of February. It has been burning through cash at a rate of about $15-million to $20-million a quarter, nearly depleting the $125.5-million it had on hand in June, 2021, after its initial public offering.
“We believe Taiga’s first-mover advantage in electrification will enable it to become the leader in the rapidly growing electric-powersports industry in the coming years,” NPC co-founder and chief executive Andrew Lapham said in a statement. Investissement Québec CEO Guy LeBlanc said IQ is keen on backing “the development and influence of a world-class player.”
Convertible debt, which offers investors the opportunity to convert their debt into equity under predetermined terms, is often used by companies in their early stage of growth when they don’t have an extensive credit history. Taiga has been a public company for about two years.
The debentures are due at the end of March, 2028, and carry an interest rate of 10 per cent. Taiga said it granted Toronto-based NPC an option to subscribe to another debenture of up to $5-million on the same terms while IQ has also made a commitment to invest further.
Both investors will get seats on Taiga’s seven-member board as a result of the investment, Taiga said. Mr. Lapham and two other directors named by NPC will join the board while Marc Fortin will join as IQ’s nominee, the manufacturer said. Four existing directors will step down once the investment is completed, Taiga said.
Depending on what the two institutional investors decide to do in exercising their conversion and option rights, NPC could end up with a ownership position in Taiga of as much as 40 per cent. For its part, IQ could wind up with a stake of 24 per cent.
Taiga said it applied to the TSX to list a total of 25.3 million common shares potentially issuable in connection with the private placement. That works out to a maximum dilution of 79.5 per cent based on the 31.8 million shares currently issued and outstanding.