SEC Charges Electric Vehicle Co. for Misleading Revenue Projections Ahead of SPAC Merger

The Securities and Exchange Commission today charged Denver-based Spruce Power Holding Corporation, the successor to XL Fleet Corp., for misleading investors about revenue projections that topped $1 billion within three years of going public. XL Fleet, which provided hybrid electric vehicle systems for commercial fleet vehicles, went public through a 2020 merger with a special purpose acquisition company (SPAC).

According to the SEC’s order, XL Fleet publicly claimed to have a more than $220 million 12-month sales pipeline, which purportedly backed its near-term revenue projections of up to $75 million and longer-term projections of up to $1.4 billion. The order finds that the company’s projections, which were featured in public filings ahead of the SPAC merger, were misleading because the sales pipeline consisted almost entirely of speculative opportunities, including sales to potential customers with whom XL Fleet had little or no contact; customers to whom XL Fleet could not legally sell its products; and stale sales opportunities that had not been updated within the company’s systems. The order also finds that XL Fleet claimed to have applied a historical conversion rate to its sales pipeline as part of its revenue projections, when, in reality, the conversion rate did not support the company’s projections.

“It goes without saying that investors commonly rely on revenue projections when deciding how and where to invest, and that’s perhaps especially true for investment decisions involving early-stage companies in the SPAC market,” said Mark Cave, Associate Director of the Division of Enforcement. “By linking its bold revenue projections to misleading claims about the company’s historical performance, XL Fleet misled investors by inhibiting their ability to differentiate between credible facts and mere aspiration.”

The order finds that Spruce Power, as the successor to XL Fleet, violated certain antifraud, proxy, and reporting provisions of the federal securities laws. Without admitting or denying the findings in the order, Spruce Power consented to a cease-and-desist order and a civil penalty of $11 million, which took into consideration the company’s cooperation and remedial efforts.

The SEC’s investigation was conducted by Mark Oh and Christine Chen, with assistance from John Archfield and Timothy Halloran, and was supervised by Jeffrey Weiss, Kristen Dieter, and Mr. Cave.