ChargePoint Buys Itself More Time By Getting Investors To Cut It Some Slack

2023 has been a rough year for some companies in the charging business, especially ChargePoint and Blink.

Both ChargePoint and Blink Charging are facing financial challenges, with less than a year of cash left. ChargePoint’s quarterly filings show increased cash usage and reduced reserves, while Blink Charging has spent more than double compared to the previous year. Both companies have a need to address outdated technologies and reliability issues.

How did these companies get here? The biggest factor has been a loss of faith in EV charging. Reliability has been bad at non-Tesla EV charging stations. Typically, it’s an inconvenience and not something that will truly strand you, but compared to gas stations, the situation looks pretty dismal on road trips. Fearing that charging reliability would kill their business, manufacturers decided to partner with Tesla and work on their own alternative charging network to ensure that their products would be useful in the real world.

This leaves the big non-Tesla players in a tight spot. The companies obviously need to continue growing to make money. They also have an obvious need to clean up their reliability problems, and that’s going to take some serious money (some of which the companies may be getting from the government). With income going down (because people don’t want to use the stations) and expenses going up (needing to fix the problems and grow at the same time), it was bound to put these companies in a bind.

In August, ChargePoint announced that it had a solid plan together to fix the reliability issues. ChargePoint’s plan is to maximize charging station reliability through the integration of technology from the networking and information security domains. Key elements of the plan include:

• A network operations center
• The use of natural language processing to proactively find complaints online
• Improved driver communications
• A training certification for electrical contractors to ensure installation happens right the first time

The company also told us at the time that it had increased the number of customers who kept an active service plan for their chargers, so the number of dead stations due to owner/host neglect should be a lot lower.

But, having a solid plan and being able to survive long enough to implement it are two different things. So the company still needed to solve (or at the very least put off) financial troubles to turn the ship around. And, in a recent press release, that’s exactly what ChargePoint announced.

The release stated that ChargePoint has secured a commitment from institutional investors, with the lead investor being Antara Capital LP, the same investor from ChargePoint’s $300M convertible notes issued in April 2022, to purchase $175M of common stock through the Company’s “at-the-market” offering facility. Additionally, during the third fiscal quarter of 2024, ChargePoint raised net proceeds of $57M in additional funds under the ATM facility.

“We are pleased to secure $232M in funding this quarter, which supports our stated goal of adjusted EBITDA profitability in the fourth fiscal quarter of next year,” said Rex Jackson, CFO of ChargePoint. “These raises and our recently announced $150M revolving credit facility are consistent with our announced capital strategy to bolster our balance sheet. We have no further plans to access the ATM.”

ChargePoint and Antara have also agreed to modify the terms. The maturity of the Notes will be extended from April 1, 2027, to April 1, 2028. The cash coupon will increase from 3.5% to 7% per year, and the payment in kind coupon will increase from 5% to 8.5% per year. Additionally, the conversion price will be adjusted from $24.03 per share to $12.00 per share.

Probably A Good Sign

I’m not expert on stonks and investing, but it’s pretty clear that the company got a key investor to cut it some slack, but it comes at a price. From ChargePoint’s point of view, it was unavoidable because the company needed more time. From the investor’s point of view, giving them the extra time means actually getting a return instead of trying to see what can be picked off the bones if the company fails. So, it’s better for them to get money later than never at all.

I think the fact that the investor was willing to invest a lot more money says a lot, too. If the company wasn’t able to show that it’s got a decent plan to get in a better position with that extra time and cash, the investor wouldn’t have gone for it. The investor very likely had access to a lot more information than we do, so that’s a good sign.

From an EV driver’s perspective, and from an environmental perspective, it’s good to see that ChargePoint isn’t on the path to going out of business. Sure, if you’re a Tesla fanatic, losing a few ChargePoint stations probably isn’t a big deal, but without alternative stations to go to, where do we think those drivers are going to go? If ChargePoint fails, you can bet the crowding at Tesla stations (along with everyone else still going) would go way up.

But, even if a charging company goes into bankruptcy, that doesn’t mean the chargers suddenly go “poof.” The property owners often own ChargePoint stations, and they’d keep owning them. The network operations still have a good chance to bring in money, so somebody would probably end up owning the network and keeping it running.

But, you can bet the interruption of a financial failure would stall network growth. So, once again, crowding at other charging stations would likely result until things got sorted out and growth caught up with drivers again.

While I know ChargePoint and other companies in a similar position have done badly on reliability in the past, I’m definitely not cheering for the company to go under. The people doing that, and hoping that Tesla can establish an EV charging monopoly, are obviously pretty short-sighted. What we need is a healthy mix of different charging providers doing a good job, and not a bunch of financial destruction followed by a stifling monopoly.

Featured image by Jennifer Sensiba.