Out of all the beaten-down public companies in the autonomous driving space, Embark Technology stands out as a conspicuously terrible stock market performer.
The San Francisco-headquartered company, which develops autonomous driving technology for the trucking industry, has presided over a roughly 98% share price decline since going public a year ago. In the process, it’s wiped out close to $5 billion in market capitalization.
Today, Embark and a few others that carried out SPAC mergers are in that weird category of companies trading below the value of cash reserves. In Embark’s case, the company’s recent market capitalization of $110 million is actually quite a bit lower than the $191 million cash it had at the end of Q3. In other words, investors seem to think it’s worth less than nothing.
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What happened? What’s noteworthy in Embark’s case, as opposed to some other venture-backed companies that crashed so mightily, is there’s no high-profile scandal. There was also no giant earnings miss, as it’s a pre-revenue company.
Rather, a mix of factors seem to have contributed to its fall, including apparent initial overvaluation, a sectorwide downturn and a critical report from a prolific short-seller. Collectively, those factors have contributed to erasing billions in valuation from a company that once secured backing from the most famous names in venture.
Embark’s story is the sort of rags-to-riches followed by SPAC-to-rags tale that’s been playing out a lot in the tech sphere. In an effort to glean a better understanding of just what happened, we look at how it got so high, and then so low.
To start at the beginning, when Embark’s co-founders Alex Rodrigues and Brandon Moak formed the venture roughly six years ago, neither was old enough to buy a beer. The company joined the Y Combinator accelerator’s 2016 batch with the initial intent of building self-driving shuttles for use on college campuses.
Shortly after, the team pivoted to self-driving trucks, focusing on highway driving. It was an enormous market and, although still fabulously difficult, presented a seemingly more tractable problem to solve.
As with many Y Combinator founding teams, venture funding followed. Between 2016 and 2019, Embark raised a $2 million seed round led by Maven Ventures, a $15 million Series A led by DCVC, a $30 million Series B led by Sequoia Capital, and a $70 million Series C led by Tiger Global.
Ambitions were high, to say the least. An article in The Wall Street Journal a few years back cited CEO Rodrigues projecting initial deployment of a fully autonomous truck in fewer than five years. The company’s long-term vision is for human truckers behind the wheel in city driving, with computers in control on the highway.
2021: A SPAC Odyssey
In 2021, Embark decided to take its venture to the public markets. In June, the company announced an agreement to list on Nasdaq through a merger with a SPAC, Northern Genesis Acquisition Corp. II, in a $5.2 billion deal.
The deal announcement touted Embark’s partnerships with a number of major carriers and fleet operators, who paid a per-mile subscription for software to enable self-driving trucks. The company said it planned to enable carrier operation of self-driving trucks in the U.S. Sunbelt region beginning in 2024.
Embark completed the merger and began trading under the ticker EMBK in November, 2021. Shares fell in first-day trading, and it’s been mostly down since.
A January report from short-seller publication The Bear Cave titled “Problems At Embark Technology” didn’t help matters, contending that “current valuation appears to be based on puffery rather than actual substance.” It warned that the company “holds no patents, has only a dozen or so test trucks, and may be more bark than bite.”
Shareholder class-action lawsuits followed, including charges that Embark had overstated its operational and technological capabilities. In its quarterly filing, the company acknowledged its status as defendant in consolidated securities class-action litigation and brushed off the allegations as “without merit.”
Public markets have not been supportive. In August, partly in a move to avoid delisting for having a share price consistently below $1, Embark announced a 20-to-1 reverse stock split. This move had the effect of boosting individual share price, but not company valuation. Since then, shares have nosedived further.
Self-driving truck startups veer off course, but Embark still has boosters
Embark is one of a number of startups focused on trucking automation that have either hit major roadblocks or ceased operations entirely. We’ll explore these in more detail in a follow-up piece.
It’s a tough space, and, as we observed a few weeks ago, the whole autonomous driving technology arena overall has been taking a beating on public markets. A couple weeks later, Ford Motor-backed Argo AI disclosed it is shutting down as well.
As for Embark, not everyone has turned bearish on the company’s course.
Misha Rindisbacher, Embark’s head of communications, attributed the company’s stock market declines to investor sentiment about the broader industry rather than company-specific performance issues.
“Our fundamentals are unchanged, and I would chalk it up to a larger sectorwide downturn,” he said, noting that the autonomous vehicle space and lidar space are both in the doldrums, and that investors are “probably less comfortable with the space and pre-revenue companies than they were a year ago.”
Series A lead investor DCVC told Crunchbase News via email that from the earliest days, Embark’s team has, in its assessment, “delivered industry-leading technology, safety and performance, earlier and more capital-efficiently by a wide margin than any competitor.”
To date, the firm says, “DCVC still holds every Embark share we ever purchased” and firm founders have “made additional personal purchases of Embark shares to demonstrate their confidence in the company.”
Pat Grady, a partner at Sequoia, still sits on Embark’s board of directors. It also appears the firm has held its stake in the company, per an Embark proxy filing this summer. Tiger Global sold shares in May but still holds a part of its stake.
Embark, for its part, is still trucking ahead in its public statements.
Earlier this month, the company announced it now has nine transfer points in its coverage map for the Sunbelt, including new locations in Dallas, El Paso, Atlanta and Jacksonville. Embark estimates the transfer points will collectively open up 28% of U.S. shipping volume in the region for autonomous transport.
The projected date of actual deployment isn’t too far off, either. Embark said it intends to commence commercial operations in 2024.
Whether this projection will come to pass, of course, is a present-day unknown. But the contrast between Embark’s public statements, which are optimistic and ambitious, and its public market performance, which shows little investor confidence, is certainly a sharp one.
Illustration: Dom Guzman
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