EV Startups Are in Trouble. Investors Don’t Care.

The stocks of numerous recently listed electric-vehicle companies are showing remarkable resilience in the face of significant turmoil at their businesses. Lordstown, semi-truck maker Nikola Corp. NKLA -2.94% and electric-car maker Canoo Inc. GOEV 0.40% all have share prices that are in line with, or above, the prices from when they struck deals to go public by merging with special-purpose acquisition companies, or SPACs, last year.

Nikola has a market capitalization of $6.5 billion, up more than 60% since it struck its deal to list last year. Months later, the company’s executive chairman resigned after a short seller accused the company of misrepresenting its technology. The company, which denied allegations of fraud, then scuttled multiple new types of vehicles it previously advertised as key to its business, and a partnership with General Motors Co. largely fell apart.

Canoo announced this spring it dropped numerous aspects of its business plan that it sold to investors months earlier, and its CEO, CFO and co-founder all left the company. It has a roughly $2.4 billion market capitalization, unchanged from when it struck the deal to list publicly. None of the three companies have begun commercial production of vehicles.

Helping explain the seemingly unshakable shares is the flood of amateur investors who bet on stocks of new car makers that went public through SPACs in the past year, analysts and observers of the sector say. Motivated by the promise of fast growth and optimism about an electric vehicle-filled future, these individual investors helped push the shares of numerous new companies in the sector to historically lofty valuations by traditional auto maker standards.

It is unclear exactly how much of the electric vehicle companies’ trading is affected by amateur investors versus hedge funds and Wall Street institutions, which also own some of the stocks. Some traders have placed bets that companies in this sector will drop in value.

The resilience of these stocks has befuddled many watching the industry.

“Normal fundamental and economic analysis would lead you to a pretty dire outcome” for some of the companies, said Jon Lopez, an analyst who covers the new-electric vehicle companies for Vertical Group. But the financial world is awash with money and starved for investments that grow quickly, he said, leading to strange outcomes like this year’s Reddit-fueled rise of so-called “meme stocks” that were boosted by investors who posted calls to send shares of certain companies “to the moon.”

The dynamics at play are similar to Telsa Inc., the electric-vehicle company run by Elon Musk that has more than quintupled in value since early last year to become the world’s most valuable auto maker, said Bradford Cornell, a professor emeritus at University of California Los Angeles’ business school. Tesla’s share price often goes up for little clear reason, while negative events often have little or no impact. Investors are more focused on a future narrative of extraordinary growth than the present day-to-day, he said.

“Is the narrative still believable? If it is, there’s no reason why it can’t go up,” he said of these companies’ stocks.

Lordstown, Nikola and Canoo each have expressed optimism about their businesses, saying they are pointed in the right direction after recent turbulence. Executives at all three have highlighted significant progress even amid their struggles—a development that seems to have tided over investors.

Lordstown executives said this week they are still on track to start producing some pickup trucks this fall, and demand appears to be strong. The company is in the process of seeking new funding. Nikola has said it is on track to deliver its first electric trucks later this year, and recently struck a deal to raise another $300 million.

Numerous companies in the electric-vehicle industry are “trying to get through SPAC puberty,” said Tony Aquila, Canoo’s chief executive and chairman. After joining the board last year, Mr. Aquila scrapped multiple aspects of Canoo’s business plan, including a plan to rent most customers cars month by month—changes he said he made to bring Canoo’s business in line with what’s achievable. He said he wants to Canoo “underpromise and overdeliver.”

The stocks of Lordstown, Nikola and Canoo are down significantly from their highs, although the same is true for the shares of other electric-vehicle makers, as the market for high-risk stocks has cooled since a burst of enthusiasm late last year. The stocks of the three electric-vehicle makers also haven’t been immune to bad news, but the dips on concerning revelations were less than many analysts expected, and the share prices often recovered many of their losses.

The buoyant environment helped allow a burst of electric-vehicle startups to collectively raise billions of dollars with ease in the past year through mergers with SPACs. They quickly became appealing for early stage startups in hot sectors like electric vehicles; SPACs allow startups to freely talk about their future projections and plans, unlike a more heavily regulated initial public offering.

Lordstown was a prime beneficiary. In its investor presentation from last summer, it highlighted how it would make an electric pickup that would be far less costly than a gas-powered Ford F-150. There was already strong demand from a long list of customers who preordered the truck, the company said, and production would take relatively little investment because the plant Lordstown got from General Motors wouldn’t need much renovation.

Those plans have unraveled.

Costs of outfitting the plant—which was previously used to build a gas-powered sedan—proved far higher than expected. Ford announced an electric F-150 that was priced more than 20 percent lower than Lordstown’s truck. The company acknowledged some preorders were made by prospective buyers who didn’t appear to have the resources to buy the trucks, and said it received a subpoena from the U.S. Securities and Exchange Commission on the issue. Plant costs soared while full-scale production was delayed.

Peter Di Pasquale, a 30-year-old engineer from Pasadena, Calif., first invested in Lordstown in April after reading about it online, believing it would be able to produce a solid truck. He said he’s aware the company has significant risks, and the management tumult in the past week was concerning. Still, the company is nearing production of its pickup, giving it a leg up on other manufacturers that are months or years behind.

“The factory is real,” he said. “The workers are real.”

“I’m cautiously optimistic.”

Write to Eliot Brown at [email protected]