The New York Stock Exchange has warned it could delist some of Lion Electric’s warrants due to an “abnormally low selling price,” the EV maker said Wednesday. The move sent the price of its regular stock spiralling downward and raises further concerns the company could soon go bust.

It’s the third time this month that the Quebec-based maker of electric buses and trucks has sounded the alarm about its mounting financial concerns. The startup, once a darling of the Canadian EV industry, has struggled to attract new orders as the EV sector flounders, and says the pro-EV government incentive programs have done little to help.

Why the NYSE is acting: Warrants give investors the right to buy an additional share of common stock at a certain price, said Doug Sarro, who teaches securities law at the University of Ottawa. If the warrant prices are approaching zero, he said, that reflects investors’ belief that it’s “highly unlikely” that Lion shares will reach that price before their expiration on May 6, 2026. 

Many companies that went public by merging with a blank-cheque (SPAC) company issued its initial investors both a share and a fraction of a warrant. In Lion’s case, it entitled investors to buy a share at US$11.50 for five years after the May 2021 IPO. That may have seemed like a bargain: in the days following the IPO, shares were trading above US$20 apiece. 

Since then, though, Lion’s share price has fallen “precipitously,” said Julian Klymochko, CEO of Calgary-based alternative asset manager Accelerate. On Wednesday, the stock plunged another 23 per cent to about 19 cents.

“Where the business is going, there’s basically no hope that those warrants will ever have value,” said Klymochko, adding that a warrant’s value comes from the probability the stock will rise above $11.50.

The lion becomes the lamb: Lion vice-president Patrick Gervais declined to comment. In an interview with The Logic in October, he laid part of the blame for Lion’s cash crunch on the federal government, which he said had promised to purchase 1,250 Lion Electric buses as part of the Zero Emission Transit Fund. The government has only approved 200 so far, he said. During a Nov. 6 earnings call, Lion Electric president Nicolas Brunet said the delays were largely responsible for the decline in deliveries during the third quarter.

At the same time, CEO and co-founder Marc Bedard said the emissions-reduction programs in the U.S. have been good for Lion’s bottom line. The company’s rolling stock under the Environmental Protection Agency’s Clean School Bus Program travelled over one million miles during the third quarter of 2024, Bedard said. 

Lenders are lion hunting: Financial burdens are piling up for Lion, which earlier this week warned that it was considering “all potential sources of financing,” including selling itself, to avoid breaching a debt agreement by the end of the month. The company has already extended its “relief period” for key loan agreements from Nov. 15 to Nov. 30. Without raising more money or negotiating a better loan, it said, its lenders could request immediate repayment.

Meanwhile, in its Nov. 6 earnings report, it said that it faced enough uncertainty that there may be “significant doubt on the company’s ability to continue” as a going concern unless it raises more money over the next 12 months.

“But it does not mean that we are out of options,” Bedard said during the accompanying earnings call.

Despite the large market for Lion’s products, CIBC analysts Kevin Chiang, Alexander Augimeri and Krista Friesen said Lion’s ability to turn that demand into revenue has been “underwhelming,” noting its order book has been down for six consecutive quarters. 

“Given the company’s current financial position, along with increased political uncertainty on what a Trump administration means for future federal EV funding, we remain skeptical,” the analysts wrote, slashing the stock’s price target from US$0.65 to US$0.30 on Nov. 6. 

The Caisse de dépôt placement du Québec, the province’s public pension fund manager, has invested $15 million in Lion since 2022. “We don’t comment on our investment intentions,” CDPQ spokesperson Jean-Benoît Houde said when asked whether the institution would invest further in Lion to stave off a potential bankruptcy. 

Investissement Québec, the investment arm of the provincial government, invested US$74 million in Lion in July 2023 alongside the Quebec government, Fonds de solidarité FTQ et Fondaction. An Investissement Québec spokesperson did not respond to emailed questions ahead of publication.

What’s next: The NYSE has halted trading for warrants that expire in May 2026, while a second set of warrants that expire in December 2027 are still trading. Sarro said there is a process where Lion could make a case to try and change the NYSE board’s mind, but Lion said in a release that it hasn’t yet decided whether to appeal the decision. If it doesn’t, the NYSE will apply to the U.S. Securities and Exchange Commission to de-list the warrants. 

NYSE spokesperson Lauren Sullivan declined to comment when asked if the exchange has prepared a more extensive argument against Lion’s warrants.