REE Automotive risk analysis
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REE Automotive (REEAF) Risk Analysis
Risk Overview Q4, 2024
Source: the company's latest filing for the period ended Dec 31, 2024, filed May 15, 2025
Risk Change Over Time
- Share Price & Shareholder Rights - Risk 1Our significant shareholders have influence and may be able to exert substantial influence over REE, including over decisions that require the approval of shareholders, and their interests may conflict with the interests of other shareholders, which could materially adversely impact REE as a public company and our shareholders' investment in our company.
Among other investors, M&G Investment Management Limited and its affiliates, or M&G, along with Motherson Group have reported beneficially owning significant amounts of our Class A Ordinary Shares (including through the exercise of our Warrants or Convertible Notes in the case of M&G, subject to its 19.99% beneficial ownership blocker) in benficial ownership filings with the SEC. As a result, in addition to other investors, these shareholders and their affiliates may have influence over the management and affairs of our Company and, if they were to decide to act either alone or together with other shareholders, could have the ability to significantly influence matters submitted to our shareholders for approval, notwithstanding REE's dual class structure, and in particular in circumstances where the holders of Class B Ordinary Shares are not aligned. For example, such shareholder(s) may encourage, cause or seek to cause REE to consider or explore extraordinary corporate transactions including a merger, reorganization or going-private transaction that could result in the de-listing or de-registration of our Class A Ordinary Shares, sales or acquisitions of assets or businesses, changes to our capitalization or dividend policy, or other material changes to our business or corporate structure. Such shareholders may also utilize rights pursuant to the provisions of the Companies Law to demand, where applicable, to call an extraordinary general meeting of shareholders at which the removal of some or all of our then-incumbent directors and the election of its nominees in their stead would be on the agenda. In this regard, M&G and Motherson have already pursued discussions with REE regarding the designation of a representative on our board of directors, culminating, in the case of Motherson, with it obtaining a representative on REE's board of directors. Success in obtaining a board seat gives a shareholder influence over the management and policies of REE and enables it to influence our operations for its own interests, which may be to the detriment of our other shareholders. The interests of one or more of these shareholders may not always coincide with, and in some cases may conflict with, the best interest of REE's business and the interests of our other shareholders. These shareholders' significant ownership in, and influence over, us may also discourage others from making an equity investment in us. In particular, this concentrated voting control limits other shareholders' ability to influence corporate matters, including control of the composition of our board of directors and our corporate strategies. Such concentration may also make some transactions or corporate decisions more difficult or impossible without their support, or more likely with such shareholder(s)' support. There can be no assurances that either M&G and/or Motherson, among other investors, either alone or together with others, will not attempt one of the above-mentioned actions in a manner that our board of directors believes is not in the best interest of our shareholders. Such future actions may require us to devote significant additional resources and time that would otherwise be directed at our business and operations or may demotivate current executives and discourage other executives from joining REE. Any of the above actions could cause the price of our Class A Ordinary Shares to decline, depending on investors' perceptions of such shareholder(s)' actions and influence, including due to the perception that conflicts of interest may exist or arise. Any of the above actions, can also result in the transition of REE to a private company and a loss of liquidity and capital appreciation for your Class A Ordinary Shares, each of which would have a material adverse impact on the ownership of your Class A Ordinary Shares and our business and operations.
- Share Price & Shareholder Rights - Risk 2The market price of REE's Class A Ordinary Shares has been extremely volatile and may continue to be volatile due to numerous circumstances beyond our control.
The market price of our Class A Ordinary Shares has fluctuated, and may continue to fluctuate, widely, due to many factors, some of which may be beyond our control. These factors include, without limitation: - "short squeezes";- comments by securities analysts or other third parties, including blogs, articles, message boards and social and other media;- large stockholders exiting their position in our securities or an increase or decrease in the short interest in our securities;- actual or anticipated fluctuations in our financial and operating results;- changes in foreign currency exchange rates;- the commencement, enrollment or results of our planned or future clinical trials of our product candidates or those of our competitors;- regulatory or legal developments in the United States and other countries;- the success of competitive products or technologies;- developments or disputes concerning patent applications, issued patents or other proprietary rights;- the recruitment or departure of key personnel;- litigation matters, including amounts which may or may not be recoverable pursuant to our officer and director insurance policies, regulatory actions affecting the Company and the outcome thereof;- actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;- disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;- significant lawsuits, including patent or shareholder litigation;- variations in our financial results or those of companies that are perceived to be similar to us;- market conditions in our market sector;- general economic, political, and market conditions and overall fluctuations in the financial markets in the United States and abroad; and - investors' general perception of us and our business. Stock markets in general and our stock price in particular have recently experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies and our Company. For example, the closing sale prices of our Class A Ordinary Shares from January 1, 2024 through December 31, 2024, ranged from a high of $11.07 per share (on December 11, 2024) to a low of $2.965 per share (on September 13, 2024). These broad market fluctuations may adversely affect the trading price of our securities. Additionally, these and other external factors have caused and may continue to cause the market price and demand for our Class A Ordinary Shares to fluctuate substantially, which may limit or prevent our shareholders from readily selling their Class A Ordinary Shares and may otherwise negatively affect the liquidity of our Class A Ordinary Shares. In addition, if the price of our Class A Ordinary Shares continues to trade at its current level, it may imply as a negative indicator of the valuation of our intangible and/or tangible assets, which could result in an impairment for these assets.
- Accounting & Financial Operations - Risk 3We operate in an industry that is new and rapidly evolving, and our estimates are subject to significant uncertainty.
We are pursuing opportunities in markets that are undergoing rapid changes, including technological and regulatory changes, and it is difficult to predict the timing and size of the opportunities. For example, SDV technology and drive-by-wire require complex technology and are subject to uncertainties with respect to, among other things, the rate of consumer acceptance and the impact of current or future regulations. Because these systems depend on inputs from many companies, commercialization of our SDV products could be delayed or impaired on account of certain technological components of our or others not being ready to be deployed in vehicles. Regulatory, safety or reliability developments, many of which are outside of our control, could also cause delays or otherwise impair commercial adoption of these new technologies, which will adversely affect our growth. While we have achieved FMVSS certification on our P7-C vehicle, we cannot provide any guarantee that such certification could be extended to vehicles incorporating our drive-by-wire product. We expect to make certain estimates and forecasts concerning our industry and of our current and anticipated future products based on industry publications and reports or other publicly available information as well as our internal estimates and expectations. These estimates and forecasts will involve a number of assumptions and limitations, and are subject to significant uncertainty, and you are cautioned not to give them undue weight as they may be incorrect or flawed in assumptions. Industry surveys and publications generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy and completeness of the included information. We do not expect to independently verify such third-party sources. Similarly, we expect that any internal estimates and forecasts would be based on a variety of assumptions, including assumptions regarding market acceptance of SDV technology in general, and drive-by-wire in particular, and the manner in which this new and rapidly evolving market will develop. While we expect any such assumptions and the data underlying our estimates and forecasts to be reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors. As a result, our expected estimates and forecasts may prove to be incorrect. If third-party or internally generated data prove to be inaccurate or we make errors in our assumptions based on that data, the expected margins or addressable market, among other items, for our SDV products may be smaller than we estimate or fail entirely to come to fruition, our future growth opportunities and sales growth may be smaller than we may estimate and/or may never come to fruition, and our business, results of operations and financial condition would be significantly adversely affected. Our future financial performance will depend on our ability to make timely investments in the correct market opportunities. If one or more of these markets experience a shift in customer or prospective customer demand, then our SDV products may not compete as effectively, if at all, and they may not be incorporated into vehicles. Given the evolving nature of the markets in which we operate, it is difficult to predict OEM or technology company demand for any of our SDV products or the future growth of the markets in which we operate. Even if the market for drive-by-wire grows substantially, there is no guarantee that demand for our SDV products will correlate with that growth, including if we fail to effectively pursue such opportunities. There is also no guarantee that our business will be successful simply because of what we will estimate to be the expected market for our SDV products. If demand does not develop or if we cannot accurately forecast customer demand, then the size of our markets, inventory requirements or our future business, results of operations, and financial condition would be adversely affected and our business would likely fail.
- Debt & Financing - Risk 4The terms of funding received from the Israel Innovation Authority require us to satisfy certain conditions that may limit and/or delay our ability to engage in certain transactions and which may reduce any potential consideration received by REE in connection with such transaction(s).
REE received funding from the Israel Innovation Authority, or the IIA, to partially finance its research and development efforts in relation to its Softwheel know how and products. For clarity, REE previously operated under the name Softwheel Ltd. in connection with its original advanced in-wheel suspension technology segment. Reference to Softwheel herein is only with respect to such technology segment. Softwheel received approximately $1,215,000 under the IIA's standard royalty-bearing programs and under the IIA's "Incubator" program. While the Company currently has no plans to use or monetize Softwheel know-how or products, and therefore does not expect to make royalty payments to the IIA in connection thereto in the near future, it remains subject to the Israeli Encouragement of Research, Development and Technological Innovation in Industry Law, 5744-1984, the IIA's regulations, and the terms and the conditions of IIA's programs, or collectively the Innovation Law. Among other terms and conditions, the Innovation Law restricts the Company's ability to transfer, in any manner, know-how funded by the IIA, without the IIA's prior approval. Transfer of such know-how outside of Israel may be subject to certain payments to the IIA of up to six times the amount of IIA funding and interest. Approval of transfer of IIA funded know-how to another Israeli company may be granted only if the recipient assumes the obligations under the Innovation Law and may be subject to royalty payments to the IIA. In addition, any change of control in REE, and any change of ownership that would cause a non-Israeli to become an "interested party" as defined in the Innovation Law (which includes any person who holds 5% in the Company or has a right to appoint a director), requires written notice to the IIA. Such non-Israeli interested party is required to sign an undertaking on a standard form required by the IIA, to comply with the rules and regulations applicable to IIA funding programs, including the restrictions and limitations on the transfer of IIA funded know-how. These terms and conditions may limit and/or delay the Company's ability to engage in future transactions, including transactions that could qualify as a change in control of REE or direct investment, and may reduce the potential consideration received by REE in connection with such transaction(s), including, for example, a transaction that involves the transfer of IIA funded know-how outside of Israel by any amounts that REE is required to pay to the IIA.
- Debt & Financing - Risk 5Servicing our Convertible Notes may require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.
As of December 31, 2024, $8.5 million in aggregate principal amount of our Convertible Notes was outstanding. Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our Convertible Notes or any future indebtedness we may incur depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business has not and may not in the future generate cash flow from operations sufficient to service our Convertible Notes and make necessary capital expenditures, or repay our outstanding indebtedness. If we are unable to generate cash flow, we may be required to adopt one or more alternatives, such as winding down or restructuring our business, selling assets, restructuring our Convertible Notes or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our Convertible Notes will depend, among other factors, on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our Convertible Note obligations. In the event of the occurrence of any of the above, it would likely qualify as an event of default under our Convertible Notes, unless otherwise waived by the holders thereof, consistent with the terms of such Convertible Notes, and thereby trigger the acceleration of a payment in an amount equal to one hundred thirty percent (130%) of the outstanding principal amount plus the accrued interest thereof on the date on which the first event of default occurred, together with all costs, including, without limitation, legal fees and expenses, of collection. There can be no assurance by REE that we have sufficient capital to make such a payment in the event that it should become due. In addition, such Convertible Notes contain a full ratchet anti-dilution protection for any offering by us of our Class A Ordinary Shares (other than certain excluded issuances) at a price (as determined in accordance with the terms of the Convertible Notes) that is less than the then current conversion price following the issuance date. This in turn may limit our ability to engage in equity financings. Moreover, upon the occurrence of the ratchet, the conversion price of the Convertible Notes will be automatically reduced to a price that is less than the then convert conversion price of the notes. Any future adjustments to the conversion price of the Convertible Notes may have a negative impact on the trading price of our Class A Ordinary Shares.
- Debt & Financing - Risk 6We may not have the funds necessary to settle conversions of our Convertible Notes in cash or to repurchase the notes upon a change in control transaction, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the notes.
Holders of our Convertible Notes have the right to require us to repurchase all or any portion of their notes upon the occurrence of a change of control transaction as defined in those notes at a repurchase price equal to an amount equal to the then outstanding principal amount (together with all accrued and unpaid interest, liquidated damages and any other amounts that may become due under the Convertible Note as at the date of such election), or to request a conversion into Class A Ordinary Shares for the full amount of the then outstanding principal amount (together with all accrued and unpaid interest, liquidated damages and/or any other amounts that may become due under the Convertible Notes as at the date of such election). In addition, upon conversion of the Convertible Notes, unless we elect to deliver solely shares to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Convertible Notes being converted. We may not have enough available cash or be able to obtain financing at the time we are required to make repurchases or conversions of these Convertible Notes. In addition, our ability to repurchase our Convertible Notes, or to pay cash upon conversions of such notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase our Convertible Notes at a time when the repurchase is required or to pay any cash payable on future conversions of such notes as required would constitute a default. Such failure could also lead to a default under agreements governing our existing or future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness, repurchase such Convertible Notes or make cash payments upon conversions of such notes. Moreover, in the event the conditional conversion feature of our Convertible Notes is triggered, holders of such notes will be entitled to convert such notes at any time during specified periods at their option. If one or more holders elect to convert such notes, unless we elect to satisfy our conversion obligation by delivering solely our Class A Ordinary Shares we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert such notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of such notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
- Corporate Activity and Growth - Risk 7REE's business model, strategy, and primary business may be subject to change from time-to-time due to, among other reasons, circumstances relating to our products, production, customers, financial condition, customers, the automotive industry, technology industry, macroeconomic and geopolitical conditions, and/or the market.
REE's business model, strategy, and/or primary business may be subject to change from time-to-time due to, among other reasons, circumstances relating to our products, production, customers, financial condition, the automotive industry, technology industry, macroeconomic and geopolitical conditions, and/or the market. In the event of such change, we may enter into a business that we have limited or no experience in, and our customers, suppliers, strategic partners, and/or other third parties may decrease the amount of business they do with us and/or terminate their relationship with us, or have our credit facility revoked, which, in turn, would permit our creditors to enforce remedies against us, including by taking control of our business, and cause us to consider reducing, discontinuing, or selling operations or seeking protection from creditors. In the event of such terminations, we may have to pay significant termination fees in connection with the termination of our agreements. Additionally, such a change in business would likely qualify as an event of default under our Convertible Notes, unless otherwise waived by the holders consistent with the terms of the notes, and thereby trigger the acceleration of a payment in an amount equal to one hundred thirty percent (130%) of the outstanding principal amount plus the accrued interest thereof on the date on which the first event of default occurred, together with all costs, including, without limitation, legal fees and expenses, of collection. Such change, among others, can also result in the sale of a significant amount of our Class A Ordinary Shares by our investors, which would significantly increase the volatility of our Class A Ordinary Shares. Such sales may, among other consequences, significantly decrease our share price, including to below $1.00, which could lead to the delisting of our Class A Ordinary Shares from Nasdaq, harming the liquidity of our shares and the ability for share capital appreciation. Any of the foregoing would materially and adversely harm REE's business, financial condition and results of operations, and would likely prevent us from implementing any business plan, leading us to discontinue our operations, restructure our business, and/or seek protection from creditors. In addition, in the event of any change in our business plan or primary business, it would impact our business projections and/or assumptions as further described in our risk factor titled "Projections of REE's operational or financial performance relies in large part on inherently uncertain assumptions that may not materialize, which could cause actual results to differ significantly", including our expected gross profits from our anticipated newer activities compared to our prior activities, and we may not at all be successful in such new activities. If any of this were to occur, it would damage our reputation, and negatively affect our operating results and likely result in the failure of our business.
Risk Highlights Q4, 2024
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 88
- Share Price & Shareholder Rights - Risk 1AddedOur significant shareholders have influence and may be able to exert substantial influence over REE, including over decisions that require the approval of shareholders, and their interests may conflict with the interests of other shareholders, which could materially adversely impact REE as a public company and our shareholders' investment in our company.
Among other investors, M&G Investment Management Limited and its affiliates, or M&G, along with Motherson Group have reported beneficially owning significant amounts of our Class A Ordinary Shares (including through the exercise of our Warrants or Convertible Notes in the case of M&G, subject to its 19.99% beneficial ownership blocker) in benficial ownership filings with the SEC. As a result, in addition to other investors, these shareholders and their affiliates may have influence over the management and affairs of our Company and, if they were to decide to act either alone or together with other shareholders, could have the ability to significantly influence matters submitted to our shareholders for approval, notwithstanding REE's dual class structure, and in particular in circumstances where the holders of Class B Ordinary Shares are not aligned. For example, such shareholder(s) may encourage, cause or seek to cause REE to consider or explore extraordinary corporate transactions including a merger, reorganization or going-private transaction that could result in the de-listing or de-registration of our Class A Ordinary Shares, sales or acquisitions of assets or businesses, changes to our capitalization or dividend policy, or other material changes to our business or corporate structure. Such shareholders may also utilize rights pursuant to the provisions of the Companies Law to demand, where applicable, to call an extraordinary general meeting of shareholders at which the removal of some or all of our then-incumbent directors and the election of its nominees in their stead would be on the agenda. In this regard, M&G and Motherson have already pursued discussions with REE regarding the designation of a representative on our board of directors, culminating, in the case of Motherson, with it obtaining a representative on REE's board of directors. Success in obtaining a board seat gives a shareholder influence over the management and policies of REE and enables it to influence our operations for its own interests, which may be to the detriment of our other shareholders. The interests of one or more of these shareholders may not always coincide with, and in some cases may conflict with, the best interest of REE's business and the interests of our other shareholders. These shareholders' significant ownership in, and influence over, us may also discourage others from making an equity investment in us. In particular, this concentrated voting control limits other shareholders' ability to influence corporate matters, including control of the composition of our board of directors and our corporate strategies. Such concentration may also make some transactions or corporate decisions more difficult or impossible without their support, or more likely with such shareholder(s)' support. There can be no assurances that either M&G and/or Motherson, among other investors, either alone or together with others, will not attempt one of the above-mentioned actions in a manner that our board of directors believes is not in the best interest of our shareholders. Such future actions may require us to devote significant additional resources and time that would otherwise be directed at our business and operations or may demotivate current executives and discourage other executives from joining REE. Any of the above actions could cause the price of our Class A Ordinary Shares to decline, depending on investors' perceptions of such shareholder(s)' actions and influence, including due to the perception that conflicts of interest may exist or arise. Any of the above actions, can also result in the transition of REE to a private company and a loss of liquidity and capital appreciation for your Class A Ordinary Shares, each of which would have a material adverse impact on the ownership of your Class A Ordinary Shares and our business and operations.
- Share Price & Shareholder Rights - Risk 2AddedThe market price of REE's Class A Ordinary Shares has been extremely volatile and may continue to be volatile due to numerous circumstances beyond our control.
The market price of our Class A Ordinary Shares has fluctuated, and may continue to fluctuate, widely, due to many factors, some of which may be beyond our control. These factors include, without limitation: - "short squeezes";- comments by securities analysts or other third parties, including blogs, articles, message boards and social and other media;- large stockholders exiting their position in our securities or an increase or decrease in the short interest in our securities;- actual or anticipated fluctuations in our financial and operating results;- changes in foreign currency exchange rates;- the commencement, enrollment or results of our planned or future clinical trials of our product candidates or those of our competitors;- regulatory or legal developments in the United States and other countries;- the success of competitive products or technologies;- developments or disputes concerning patent applications, issued patents or other proprietary rights;- the recruitment or departure of key personnel;- litigation matters, including amounts which may or may not be recoverable pursuant to our officer and director insurance policies, regulatory actions affecting the Company and the outcome thereof;- actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;- disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;- significant lawsuits, including patent or shareholder litigation;- variations in our financial results or those of companies that are perceived to be similar to us;- market conditions in our market sector;- general economic, political, and market conditions and overall fluctuations in the financial markets in the United States and abroad; and - investors' general perception of us and our business. Stock markets in general and our stock price in particular have recently experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies and our Company. For example, the closing sale prices of our Class A Ordinary Shares from January 1, 2024 through December 31, 2024, ranged from a high of $11.07 per share (on December 11, 2024) to a low of $2.965 per share (on September 13, 2024). These broad market fluctuations may adversely affect the trading price of our securities. Additionally, these and other external factors have caused and may continue to cause the market price and demand for our Class A Ordinary Shares to fluctuate substantially, which may limit or prevent our shareholders from readily selling their Class A Ordinary Shares and may otherwise negatively affect the liquidity of our Class A Ordinary Shares. In addition, if the price of our Class A Ordinary Shares continues to trade at its current level, it may imply as a negative indicator of the valuation of our intangible and/or tangible assets, which could result in an impairment for these assets.
- Share Price & Shareholder Rights - Risk 3If REE is unable for any reason to meet the continued listing requirements of Nasdaq, such action or inaction could result in a delisting of the Class A Ordinary Shares.
On November 10, 2022, REE announced that it received an initial notification letter from Nasdaq's Listing Qualifications Department notifying REE that it had 180 days to regain compliance with the minimum bid price requirement set forth in Nasdaq's continued listing rules. Nasdaq's continued listing rules require that listed securities maintain a minimum bid price of $1.00 per share, and that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days or more. On November 1, 2023, REE received a notification letter from Nasdaq Listing Qualifications staff notifying REE that it had regained compliance with the minimum bid price requirement set forth in the Nasdaq Listing Rule 5550(a)(2). If REE fails to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist the Class A Ordinary Shares. Such a delisting would likely have a negative effect on the price of the Class A Ordinary Shares and would impair your ability to sell or purchase the Class A Ordinary Shares when you wish to do so. In the event of a delisting, REE can provide no assurance that any action taken by it to restore compliance with listing requirements would allow its Class A Ordinary Shares to become listed again.
- Share Price & Shareholder Rights - Risk 4If securities and industry analysts do not publish research or reports about REE's business or publish negative reports about its business, REE's share price and trading volume may suffer.
The trading market for the Class A Ordinary Shares is and will be influenced by the research and reports that securities or industry analysts publish about REE or its business. REE does not have any control over such analysts and cannot provide any assurance that analysts will continue to cover REE or provide favorable coverage. If one or more of the analysts who cover REE downgrade REE's shares or change their opinion of REE's shares, REE's share price would likely decline. If one or more of these analysts cease coverage of REE or fail to regularly publish reports on REE, REE could lose visibility in the financial markets, which could cause its share price or trading volume to decline.
- Share Price & Shareholder Rights - Risk 5The dual class structure of our Ordinary Shares has the effect of concentrating voting power with REE's Founders, who serve as its Chief Executive Officer and Chief Technology Officer, which limits an investor's ability to influence the outcome of important transactions, including a change in control.
The Class B ordinary shares, without par value, of REE, or Class B Ordinary Shares, have 10 votes per share, while shares of Class A Ordinary Shares have one vote per share. REE's Founders, Daniel Barel and Ahishay Sardes, hold all Class B Ordinary Shares granting each of them, when combined with each of their holdings of Class A Ordinary Shares, approximately 26.6% of voting power and together approximately 53.2% of the voting power of REE as of May 7, 2025. See "Item 7A. Major shareholders". As a result, if they act together, they will be able to control matters submitted to REE's shareholders for approval, including the election of directors, amendments of its organizational documents and any merger, consolidation, sale of all or substantially all of its assets or other major corporate transactions (although neither Founder individually has a majority of the voting power). REE's Founders may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. While the Class B Ordinary Shares do not have any economic rights, this concentrated control may have the effect of delaying, preventing or deterring a change in control of REE, could deprive its shareholders of an opportunity to receive a premium for their shares as part of a sale of REE, and might ultimately affect the market price of shares of Class A Ordinary Shares.
- Share Price & Shareholder Rights - Risk 6REE cannot predict the impact REE's dual class structure may have on the stock price of Class A Ordinary Shares.
REE cannot predict whether REE's dual class structure will result in a lower or more volatile market price of Class A Ordinary Shares or in adverse publicity or other adverse consequences. Previously, certain index providers announced restrictions on including companies with multiple-class share structures in certain of their indexes. For example, S&P Dow Jones in 2017 announced the exclusion of companies utilizing dual or multi-class capital structures from the S&P Composite 1500, comprised of the S&P 500, S&P MidCap 400 and S&P SmallCap 600. However, in April 2023, it reversed this policy and announced that companies with dual or multi-class capital structures will again be eligible for inclusion in its indices. MSCI and FTSE Russell had similar discussions surrounding the issue of dual classes as well. Due to the policy discussions of index providers, we cannot guarantee that we will not be excluded from an index due to our dual share class. In the event that REE is ineligible for inclusion in an index, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track such index would not invest in our Class A Ordinary Shares. Given the sustained flow of investment funds into passive strategies that seek to track certain indexes, exclusion from indexes could make our Class A Ordinary Shares less attractive to other investors. In addition, certain proxy advisory firms oppose the use of multiple class structures and may publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. As a result, the market price of Class A Ordinary Shares could be adversely affected. In addition, institutional investors and certain investment funds may also be precluded, reluctant or unwilling to invest in entities with dual class structures due to a lack of ability to meaningfully influence corporate affairs and policies through voting. Such restrictions, reluctance and unwillingness may make our Class A Ordinary Shares less attractive to investors and, as a result, the market price of our Class A Ordinary Shares could be adversely affected.
- Share Price & Shareholder Rights - Risk 7Investors' rights and responsibilities of REE's shareholders are governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of non-Israeli companies.
Because REE was incorporated under Israeli law, the rights and responsibilities of its shareholders are governed by its Amended and Restated Articles and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S. and other non-Israeli corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders on certain matters, such as an amendment to the company's articles of association, an increase of the company's authorized share capital, a merger of the company and approval of related party transactions that require shareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine the outcome of a shareholders' vote or to appoint or prevent the appointment of an office holder in the company has a duty to act in fairness towards the company. These provisions may be interpreted to impose additional obligations and liabilities on REE's shareholders that are not typically imposed on shareholders of U.S. corporations.
- Share Price & Shareholder Rights - Risk 8Provisions of Israeli law and REE's Amended and Restated Articles may delay, prevent or make undesirable an acquisition of all or a significant portion of its shares or assets.
Provisions of Israeli law and REE's Amended and Restated Articles could have the effect of delaying or preventing a change in control and may make it more difficult for a third-party to acquire REE or its shareholders to elect different individuals to REE's board of directors, even if doing so would be considered to be beneficial by some of REE's shareholders, and may limit the price that investors may be willing to pay in the future for the Class A Ordinary Shares. Among other things: - Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are purchased;- Israeli corporate law requires special approvals for certain transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions;- Israeli corporate law does not provide for shareholder action by written consent for public companies, thereby requiring all shareholder actions to be taken at a general meeting of shareholders;- the Amended and Restated Articles generally require a vote of a simple majority of the voting power represented at a general meeting of shareholders in person or by proxy and voting thereon, as one class;- the Amended and Restated Articles generally do not permit a director to be removed except by a vote of the holders of (i) so long as any Class B Ordinary Shares remain outstanding, a simple majority of the voting power represented at a general meeting of shareholders in person or by proxy and voting thereon, as one class, and (ii) if no Class B Ordinary Shares remain outstanding, a supermajority of at least sixty-five percent (65%) of the voting power represented at a general meeting of shareholders in person or by proxy and voting thereon; and - the Amended and Restated Articles generally provide that director vacancies may be filled by REE's board of directors. Further, Israeli tax considerations may make potential transactions undesirable to REE or some of its shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including, a holding period of two years from the date of the transaction during which certain sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred. The tax benefits that are available to REE require it to continue to meet various conditions and may be terminated or reduced in the future, which could increase REE's costs and taxes. REE may be eligible for certain tax benefits provided to "Preferred Technological Enterprises" under the Israeli Law for the Encouragement of Capital Investments, 1959, referred to as the Investment Law. In order to remain eligible for the tax benefits for "Preferred Technological Enterprises" it must continue to meet certain conditions stipulated in the Investment Law and its regulations, as amended. If these tax benefits are reduced, cancelled or discontinued, REE's Israeli taxable income from the approved enterprise would be subject to regular Israeli corporate tax rates. The current standard corporate tax rate for Israeli companies is 23%. Additionally, if REE increases its activities outside of Israel through acquisitions, for example, its expanded activities might not be eligible for inclusion in future Israeli tax benefit programs. See "Item 10.E. Taxation – Certain Material Israeli Tax Considerations."
- Share Price & Shareholder Rights - Risk 9REE's Amended and Restated Articles provide that unless REE consents otherwise, the competent courts of Tel Aviv, Israel shall be the sole and exclusive forum for substantially all disputes between REE and its shareholders' under the Companies Law and the Israeli Securities Law, which could limit its shareholders ability to bring claims and proceedings against, as well as obtain favorable judicial forum for disputes with, REE, its directors, officers and other employees.
The competent courts of Tel Aviv, Israel shall be the exclusive forum for (i) any derivative action or proceeding brought on behalf of REE, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of REE to REE or REE's shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Israeli Companies Law, 5759-1999, as amended, or the Companies Law, or the Israeli Securities Law, 5728-1968, as amended, or the Israeli Securities Law. This exclusive forum provision is intended to apply to claims arising under Israeli Law and would not apply to claims brought pursuant to the Securities Act or the Exchange Act or any other claim for which federal courts would have exclusive jurisdiction. Such exclusive forum provision in the Amended and Restated Articles will not relieve REE of its duties to comply with federal securities laws and the rules and regulations thereunder, and shareholders of REE will not be deemed to have waived REE's compliance with these laws, rules and regulations. This exclusive forum provision may limit a shareholder's ability to bring a claim in a judicial forum of its choosing for disputes with REE or its directors or other employees which may discourage lawsuits against REE, its directors, officers and employees.
- Share Price & Shareholder Rights - Risk 10As REE is a "foreign private issuer" and follows certain home country corporate governance practices, its shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.
As a foreign private issuer, REE is permitted to follow certain home country corporate governance practices rather than those otherwise required by Nasdaq rules, provided that it discloses the requirements it is not following and describes the equivalent home country practices it follows instead. REE relies on this "foreign private issuer exemption" with respect to the Nasdaq rules for director nomination procedures and shareholder meeting quorums. REE may in the future elect to follow home country practices with regard to other matters. As a result, its shareholders will not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.
- Share Price & Shareholder Rights - Risk 11REE may issue additional Class A Ordinary Shares or other securities without shareholder approval, which would dilute existing ownership interests and may depress the market price of Class A Ordinary Shares.
REE has previously issued and may continue to issue additional Class A Ordinary Shares or other equity securities of equal or senior rank in the future in connection with, among other things, REE's equity incentive plan, without shareholder approval, in a number of circumstances. REE's issuance of additional Class A Ordinary Shares or other equity securities of equal or senior rank would have the following effects: - REE's legacy shareholders' proportionate ownership interest in REE may decrease;- the amount of cash available per share, including for payment of dividends in the future, may decrease;- the relative voting strength of each previously outstanding Class A Ordinary Share may be diminished; and - the market price of Class A Ordinary Shares may decline. As of December 31, 2024, REE had 65,744 Class A Ordinary Shares available for future grant under the 2021 Plan and 154,284 shares available under the Employee Stock Purchase Plan. There were 3,806,089 Class A Ordinary Shares underlying outstanding options under its equity incentive plans, at a weighted average exercise price of $4.58 per share, 3,362,234 of which were vested and exercisable. Additionally, there were 1,582,803 Class A Ordinary Shares underlying outstanding RSUs under its equity incentive plan.
- Share Price & Shareholder Rights - Risk 12Future sales of large amounts of shares into the public markets may adversely affect the market price of Class A Ordinary Shares.
We have issued and sold, and may continue to issue and sell, additional Class A Ordinary Shares and/or securities convertible or exchangeable into Class A Ordinary Shares in the public markets. Such sales in the past have included our ATM program, securities offerings during 2024, and, most recently, our registered direct offerings during March 2025. As a result, a substantial number of our Class A Ordinary Shares can be sold in the public market, along with sales by investors that purchased our securities in connection thereto. For example, as further described in Item 7.A of this Annual Report, among other shareholders, M&G currently holds 19.5% of our Class A Ordinary Shares along with additional shares that it can acquire through Warrants and Convertible Notes whereas Motherson currently holds 18.5% of our Class A Ordinary Shares. These shareholders along with other shareholders of REE could sell any or all of their shares at any time on the public market or to a person who wishes to acquire control of us, including in circumstances where such shareholder(s) no longer believes in REE, its management, financial condition, and/or business plan. Sales of a substantial number of our Class A Ordinary Shares in the public markets, or the perception that such sales could occur, could depress the market price of our Class A Ordinary Shares and/or impair our ability to raise capital through the sale of additional equity securities. Such large sale amounts could likewise cause our share price to fall below the minimum bid amount on Nasdaq, which may cause us to be delisted if we are unable to reestablish compliance with the minimum bid amount. Additionally, pursuant to the Investors' Rights Agreement (defined below) between REE, 10X Capital Venture Acquisition Corp., or 10X, Capital and certain of REE's shareholder, the Sponsor can demand that REE register its registrable securities under certain circumstances and also has piggyback registration rights for these securities in connection with certain registrations of securities that REE undertakes. REE is also required to use its commercially reasonable effort to maintain the effectiveness of a registration statement under the Securities Act covering such securities and certain other securities of REE, including those held by PIPE Investors. The availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of REE's Class A Ordinary Shares.
- Share Price & Shareholder Rights - Risk 13U.S. Holders of Class A Ordinary Shares may suffer adverse tax consequences if REE is treated as a passive foreign investment company.
A non-U.S. corporation generally will be treated as a "passive foreign investment company," or a PFIC, for U.S. federal income tax purposes, in any taxable year if either (1) at least 75% of its gross income for such year is passive income (such as interest, dividends, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of assets giving rise to passive income) or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce or are held for the production of passive income. Based on the current and anticipated composition of the income, assets and operations of REE and its subsidiaries, there is a significant risk that REE was a PFIC for U.S. federal income tax purposes for 2024, and REE may be a PFIC for U.S. federal income tax purposes for the current or future taxable years. This is a factual determination that depends on, among other things, the composition of REE's income and assets, and the market value of its shares and assets, including the composition of income and assets and the market value of shares and assets of its subsidiaries, from time to time, and thus a complete determination can only be made annually after the close of each taxable year. Furthermore, the value of our gross assets is likely to be determined in part by reference to our market capitalization, which may fluctuate significantly. Thus, no assurance can be given as to whether REE will be a PFIC in the current or any future taxable year. In addition, REE's U.S. counsel expresses no opinion with respect to REE's PFIC status for 2024, current, or future taxable years. If REE is a PFIC for any taxable year, a U.S. Holder of Class A Ordinary Shares and/or Warrants may be subject to adverse tax consequences and may incur certain information reporting obligations. Under the PFIC rules, unless such U.S. Holder makes an election available under the Code (which election could itself have adverse consequences for such U.S. Holder), such U.S. Holder may be subject to U.S. federal income tax at the then prevailing maximum rates on ordinary income and possibly an "interest" charge, in respect of "excess distributions" and upon any gain from the disposition of Class A Ordinary Shares and/or Warrants, as if the excess distribution or gain had been recognized ratably over such U.S. Holder's holding period of the Class A Ordinary Shares and/or Warrants. Certain elections (including a qualified electing fund election (or a QEF election) or a mark-to-market election) that may be available to U.S. Holders of Class A Ordinary Shares to mitigate some of the adverse tax consequences resulting from PFIC treatment, however, are not available with respect to the Warrants. Additionally, there can be no assurance that REE will have timely knowledge of its status as a PFIC in the future or that REE will timely provide information that would be required in order for a U.S. Holder to make a QEF election. See "Item 10.E. Taxation – Certain Material U.S. Tax Considerations – U.S Federal Income Tax Consequences of the Ownership and Disposition of Class A Ordinary Shares and Warrants to U.S. Holders – Passive Foreign Investment Company Rules" for further discussion. U.S. Holders of Class A Ordinary Shares and/or Warrants are strongly encouraged to consult their own advisors regarding the potential application of these rules to REE and the ownership of Class A Ordinary Shares and/or Warrants.
See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.
