An e-commerce retailer is injecting millions of dollars into a fledgling small-car startup in Phoenix.
Overstock.com (Nasdaq: OSTK) is purchasing $2.5 million worth of common stock in Phoenix-based Elio Motors (OTC: ELIO) at $2.75 a share in a private placement. The deal was announced April 24.
Elio intends to use the proceeds from the stock sale to fund expenditures and repay debts.
Phoenix-based Elio also announced plans to issue a digital token-based offering dubbed ElioCoin to fund production. This is different from other digital currency offerings, also called ICOs or initial coin offerings, in that it will be specifically associated with and sold for the purpose of automobile manufacturing. The token offering will be facilitated by JonesTrading with tokens available at first only to accredited investors.
Elio Motors is developing an inexpensive three-wheeled car that could top out at
84 miles per gallon.
Elio Motors is developing an inexpensive three-wheeled car that could top out at 84 miles per gallon.
Elio wants to ramp up production of its product — a three-wheel, highly fuel-efficient vehicle that costs less than $8,000 — by 2019. Elio debuted its vehicle at the Consumer Electronics Show in 2015, according to the Verge, but has since struggled to raise additional capital to ramp up production and burned through its limited cash.
Elio leased a former General Motors plant in Louisiana, but the lack of funding — and by extension, lack of work — has caused tension with that community, according to a report late last year.
Those struggles did not deter Overstock CEO Patrick Byrne from making an investment in the fledgling auto startup, even anticipating that Overstock will become a place to sell the economical car.
“I believe Elio’s vision and business model to build a $7,500 ultra-high mileage, ultra-fuel-efficient car-like vehicle is a win for America,” Byrne said in a press release. “An Elio that was brought to Manhattan drew a crowd just parked against the curb. I sat in it for five minutes and was in awe. It is really comfortable, and feels like great fun. I am confident that this will become my car for at least two-thirds of the days I drive. Given its breakthrough pricing and ultra-low delivery cost, I anticipate that Overstock Cars and even Overstock Retail will play a role in bringing this product to the public.”
Elio Motors showed off its quirky, highly fuel-efficient, and cheap three-wheeled car way back at CES 2015, but the start-up has struggled mightily since. Today, it has received a bit of a lifeline. Online retailer Overstock.com announced that its buying $2.5 million of newly issued shares of Elio’s common stock. (Elio shares are traded on the OTC market.) The money will, in part, help pay off Elio Motors’ “outstanding debt and accounts payable.”
Elio Motors also announced today that it will launch a token-based offering called Ello Coin to fund production, which it still plans to get rolling in 2019. Instead of an initial coin offering, or “ICO,” the company will launch a “security token offering” facilitated by Jones Trading, with the tokens only initially available to “accredited investors.”
For a while, the pitch for the Elio Motors three-wheeler proved to be an attractive one. Around 65,000 customers put down a reservation, which cost anywhere between $100 and $1,000. The car, which the company just calls Elio, forces consumers to trade the luxury and convenience of a more normal-sized car. But in return, they get one that promised up to 84 miles per gallon for under $8,000.
Unlike most of the other futuristic or environmentally conscious car start-ups that show up at CES, Elio buyers could still fill up their ride at a traditional gas station. Unfortunately for Elio Motors, it still ran into many of the same problems as those other car start-ups. The company had trouble raising the hundreds of millions it believed it needed for production, which led to a delay. At the same time, Elio Motors quickly burned through the cash it had raised. The company had mere thousands of dollars in the bank last summer with debts totalling in the tens of millions. Elio Motors had to furlough a “significant portion” of its workforce to stay afloat as it searched for around $100 million in funding.
Elio Motors has a lease on an old GM manufacturing facility in Shreveport, Louisiana, but its lack of funding (and therefore lack of work) led to tension with the community there, according to a late 2017 investigation by Jalopnik.
Despite the company’s troubles, that original promise — a small, cheap car with big MPG — seems to be what wooed Overstock.com into investing, according to the press release. Founder and CEO Patrick Byrne said he “was in awe” after just five minutes in the car. “I am confident that this will become my car for at least two-thirds of the days I drive,” he said. Byrne also said he believes in Elio Motors’ vision, calling the vehicle “a win for America.”