VW and Goldman Sachs Among Firms Exposed to Northvolt Collapse – Morningstar
Northvolt, a once-promising battery-maker company based in Sweden, has recently filed for Chapter 11 bankruptcy protection in the US. This news has not only left investors in a tough spot but has also raised concerns about Europe’s ambitions in the electric vehicle industry.
Since its inception in 2016, Northvolt managed to raise an impressive sum of over USD 13 billion in equity and debt. However, the company’s downfall came as it struggled to meet production targets for battery cells, resulting in a cancellation of a significant contract with carmaker BMW. This setback was a crucial blow, leading to financial difficulties and ultimately layoffs.
With only USD 30 million in cash on hand and over USD 5.8 billion in debt to creditors, Northvolt faced an uphill battle that led to its bankruptcy filing. The company’s pre-tax losses widened significantly from USD 318 million in FY2022 to USD 1.2 billion in FY2023, making it challenging to secure additional funding.
The decision to file for bankruptcy not only allows Northvolt to restructure its debt and operations but also opens up the possibility of seeking new capital. However, for existing investors, significant losses are now a reality given the company’s financial struggles.
This turn of events serves as a cautionary tale for the industry and highlights the challenges faced by innovative startups, even with substantial funding. It’s a stark reminder of the volatility and risks associated with investing in emerging technologies and markets, urging investors to approach such opportunities with caution and due diligence.
