Electric bike brand SONDORS files for IPO with new product hints, but details raise troubling questions

The Malibu-based electric bicycle company SONDORS recently submitted filings to the US Securities and Exchange Commission (SEC) indicating that it seeks to go public, which would make it the first e-bike company in the US to do so. But in addition to revealing some interesting new future products, the filings shined some light on past missteps and gave customers who claim that the company misleads the public ample ammunition.

We’ve seen several electric mobility companies go public in the US recently, including Harley-Davidson’s electric motorcycle brand LiveWire, Taiwanese battery swapping giant Gogoro, and Texas-based electric powersports company Volcon.

But SONDORS would become the first electric bicycle maker to hit the US stock exchanges.

The company shot to stardom back in 2015 when it debuted a $500 fat-tire electric bicycle in a massively popular crowdfunding campaign.

In the years since, SONDORS has continuously added to a rapidly expanding electric bicycle product portfolio, as well as branched out into a light electric motorcycle known as the Metacycle and a perpetually stalled three-wheeled electric “car” project.

The company recently submitted an S-1 filing, which is a federally required form that any company seeking to go public must file with the US SEC. SONDORS’s filing gives us never-before-seen insight into the company’s operations and financial standing.

Most privately owned electric bicycle companies like Rad Power Bikes and Lectric eBikes are purposefully opaque about their business metrics. We have to rely on publicly available import data and industry whispers to extrapolate information like annual sales data, with both of those companies estimated to sell e-bikes in the six-figure volumes annually.

But looking through SONDORS’s prospectus document shows deeper insight into the company that also reveals some unflattering information. For starters, while other major e-bike companies like Rad and Lectric are assumed to be well into profitability at this point (despite their exact financials not being known to the public), SONDORS’s financial reports in the filing that cover the previous two fiscal years show that the company operated at a net loss in both 2020 and 2021.

The financial documents reveal that both years actually saw positive gross profits on products sold, with between $12M to $16M in revenue and $3.5M to $4.5M in gross profits. But the company spent between $2M to $3M in marketing and between $2.4M to $4.8M on general and administrative expenses, which typically includes items like salaries, rent, maintenance, office expenses, interest on loans, insurance, etc. That resulted in net losses of $745,000 in 2020 and $4.9M in 2021.

The financial documents also reveal a high liability to asset ratio of over 1, which would indicate that a company currently has more liabilities than assets. That could mean that if a company doesn’t raise additional funds or increase revenue, it could eventually be unable to meet its current financial obligations.

The S-1 filing submitted by SONDORS states this explicitly, with the company writing that, “Our ability to continue as a going concern will be determined by our ability to complete this offering. If we are unable to obtain adequate funding from this offering or in the future, or if we are unable to grow our revenue to achieve and sustain profitability, we may not be able to continue as a going concern.” A going concern is MBA-speak for a business that can meet all of its financial obligations.

In this case of SONDORS, the financial reports indicate that the high liability to asset ratio is mostly due to a large amount of customer deposits associated with pre-orders for products. These are recorded as a type of liability until the products are delivered.

Out of the company’s current $22.9M in liabilities, as stated in the financial reports ending in June 30, 2022, approximately $19.4M is made up of customer deposits. That compares to the total current assets of $18.5M for the same period, consisting mostly of $5.2M in cash, $4.8M in inventory, and $7.95M in prepaid expenses.

However, these figures are only current as June 30, 2022. They don’t include any financial events that occurred in Q3 or the beginning of Q4 of this year that could impact the company’s financial outlook heading up to a potential IPO, so we don’t have a current snapshot of the company’s financials for comparison.

The filing also revealed more information about the stalled deliveries of SONDORS Metacycle electric motorcycles.

We reported in the past that the lightweight electric motorcycles have taken a circuitous path to delivery. The bikes finally began deliveries in the past few months but were only limited to pre-order customers located in California. Now we’re learning that a licensing issue may be related to the slow rollout.

As the company explained in the filing, “In the second half of September 2022, we determined that we had inadvertently delivered a limited number of MetaCycles to some of our customers before we had obtained all necessary licenses. As a result, we have ceased delivering MetaCycles and are in the process of applying for and obtaining such licenses and we will commence deliveries of our MetaCycles once we obtain the requisite licenses. We expect to obtain our dealers license in the State of California by the early part of November 2022.”

However, it should also be noted that the language in these S-1 filings is purposefully skewed towards a conservative statements to avoid any potential claims of misleading investors. Thus, companies often go to extremes to explicitly describe worst case scenarios. Such language similar to the above quote can also be found nearly verbatim in numerous other S-1 filings.

The document also raises questions about the true number of electric bicycles that the company has delivered since its founding.

For example, SONDORS writes in the filing that they have “played a critical role in creating the e-bike category by developing, manufacturing and selling one of the first e-bikes at scale both domestically and internationally and have delivered over 51,000 units in 72 countries since 2015.”

However, the company has repeatedly claimed much higher sales volume in marketing material and to the press, such as on this page of the company’s website that claims to have delivered more than 250,000 electric bikes and marketing from late last year that claimed, “We’ve put 200,000 SONDORS riders on the road!”

A number of interesting operational and planning details were also revealed in the documents.

The company stated that it currently has around 11,000 pre-orders for the Metacycle, and gave further insight to future vehicles that could follow the Metacycle.

“We are currently designing an electric all terrain vehicle (ATV), an electric dirt bike, a larger version of the MetaCycle, MetaCycle-stylized e-bikes and other e-mobility products. These planned product offerings are in the design and prototyping phase at our California-based engineering facility and are being designed with a focus on our core tenets of industry leading style, exceptional performance and affordability.”

Electric ATVs is a sorely underdeveloped market with few entries available. If SONDORS could bring a product to market and introduce it with the company’s signature low entry pricing, it could be a major boon for the market.

Additional larger electric motorcycles like a scaled-up Metacycle or even electric bicycles and mopeds styled after the Metacycle could also be interesting additions to the market.

Electrek’s Take

First of all, there are many questions that have been raised here that SONDORS deserves the right to respond to. We reached out to the company for comment before publishing and will update if and when we receive a response.

We wouldn’t have known any of these details had it not been for SONDORS submitting its S-1 form in anticipation of going public. But now that we do, there are many questions left unanswered.

SONDORS has done an impressive job building a diverse range of e-bikes and becoming the first e-bike owned by many riders. The Metacycles that have already been delivered are also great rides — I recently tested one myself (and I’ll have the review finished and posted here on Electrek soon).

But the questions regarding the company’s financial and operational health as well as potentially misleading marketing do worry me, both as a consumer and as someone who advocates for the electric bicycle industry as a whole. The undeniable potential of e-bikes and light electric vehicles to serve as clean, efficient, healthy, and fun alternative forms of transportation is critical to improving cities around the world. As a major player in that industry, I hope that SONDORS has the capacity to succeed, both in fulfilling its commitments and in positively contributing to the industry.

The questions raised by the company’s S-1 filing certainly make me hope that the SONDORS management will be forthcoming about this information and its implications.

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