- Glassmaker View halted the installation of key machinery, people familiar with its operations said.
- The SoftBank-backed company has high operating costs that eat into its cash reserves.
- Former employees told Insider that View burned capital almost as fast as it raised it.
View Inc., the SoftBank-backed glass manufacturer under pressure from Nasdaq for failing to file recent financial statements, has delayed the introduction of new production machinery critical to its growth, Insider has learned.
This month, the company halted the installation of a second “coater” — a machine that applies a special film to its glass — at its factory in Olive Branch, Mississippi, to slow down cash burn, three people familiar with View’s operations told Insider.
The second coater was meant to help View produce more glass over a shorter time period and at a lower average cost, the people familiar with the operations said. It was also expected to streamline the manufacturing process through more automation, two of the three people said.
The delayed installation — which was unlikely to restart until the third quarter of 2022, the people said — meant View wouldn’t be able to increase the production capacity of its eco-friendly “smart glass.”
View manufactures smart glass for windows in commercial buildings. The window units, which use low-voltage wiring to control the window’s tint, are typically covered by a 10-year warranty and cost four times as much as conventional glass to produce, said Pavel Molchanov, a director and equity research analyst at Raymond James within its energy group.
Improving the production process has been a key focus of View’s in recent years.
View said in an April regulatory filing that it had allocated $410 million toward capital expenditure, primarily in its factory, as of the end of 2020. It also said it expected to spend up to about $160 million in additional factory expenses over the next two to four years, mainly on automation processes and a second production line, of which the second coater was a key piece.
“We expect the name-plate capacity of the second production line to be 7.5 million square feet of smart glass per year, bringing total name-plate capacity of our facility to 12.5 million square feet per year. We believe our facility, including the second production line, will enable us to achieve economies of scale, meet future demand, and achieve profitability,” the filing said.
Meanwhile, View’s cash reserves dipped to $373 million at the end of September, from $507 million at the end of March. View merged with a Cantor Fitzgerald-sponsored special purpose acquisition vehicle in a “de-SPAC” transaction worth $815 million in early March.
View’s merger with Cantor’s SPAC came at a hot time for the so-called blank-check vehicles. The first 10 weeks of 2021 saw SPACs raise more cash than all of 2020, Refinitiv data indicated.
Younger, sometimes unprofitable companies are enamored with SPACs because, unlike a conventional initial public offering, SPAC targets can provide investors with forward-looking projections that jazz up their valuations. While SPACs are a handsome payday for “pre-revenue” companies, there’s a risk if the target trades poorly after going public.
Spokespersons for View and Cantor Fitzgerald did not return multiple requests for comment.
While burning cash wasn’t uncommon among startups, View’s manufacturing process was so expensive, it hindered the company’s chances of making a profit, said 12 former employees and one current employee, who spoke with Insider on the condition of anonymity to speak freely.
“They will never be able to sell the glass at a price that will cover the cost,” a former employee familiar with View’s finances predicted.
View’s manufacturing process is costly and leaves no room for error
Much of View’s cash burn stemmed from its expensive manufacturing process, insiders said.
In previous securities filing that outlined the company’s risk factors, View said it had a negative cash flow from “operating activities” of $310 million, $234 million, and $165.7 million in 2018, 2019, and 2020, respectively.
One hurdle in the manufacturing process is how little room for error there is. Much of the glass has to be thrown away after an electrochromic film is applied by the coater as it cannot be used if there’s a single imperfection, even a tiny scratch.
A current employee familiar with factory operations said that after factoring in how much glass had to be disposed of after running it through the coater that applied the film, the manufacturing yield — the percentage of non-defective items produced — was about 60%.
The new coater was meant to automate much of the process, reducing the potential for human error and increasing production capacity. The assembly of the new machinery began in the first half of 2019 after SoftBank invested $1.1 billion, former employees said.
In regulatory filings, View acknowledged it would require “significant” capital to help growth. It specifically cited the inventory needed to support an expected increase in production.
Raymond James’ Molchanov told Insider that he believed View was a “highly specialized proprietary product” that was still at an early stage in the adoption curve.
“So once this adoption curve reaches a more sustainably high level, and the economies of scale are achieved, this type of business should have a gross margin close to 50%,” he said.
Rao Mulpuri, View’s CEO, has helped court investors despite difficult financials
But View’s high manufacturing costs haven’t stopped investors from betting on the company, thanks in large part to CEO Rao Mulpuri, former employees said.
BlackRock, for example, provided View with $70 million through its credit arm in 2017, but it was repaid a year later when SoftBank took a 30% stake in the company via a $1.1 billion investment, a person familiar with the transaction said.
A spokesperson for SoftBank declined to comment.
View also secured a $250 million loan in 2019 from Greensill Capital, another SoftBank investment that specialized in supply-chain finance, before it filed for bankruptcy in March.
Mulpuri spares no expense when looking to close a deal, at times transporting prospective financiers via private jet to View’s offices in California or for site inspections at its factory in Olive Branch, a former member of View’s finance team said.
Investors bought into View’s story and were drawn to Mulpuri’s charm, another former employee privy to View’s finances said.
“The story that he tells, it’s mesmerizing,” the former employee added. “He believes in his vision 100%, and there is value to that. People think, ‘Wow, I see the world changing from this.'”
But internally, Mulpuri would often disagree with his own finance team’s findings, labeling them “bean counters,” an informal term for an accountant who emphasizes budgets and expenditure, the former member of View’s finance team said.
An independent audit completed in November found that View understated the cost to fix and replace malfunctioning windows by at least $18 million. That led to the departure of Vidul Prakash, its third chief financial officer in four years.
And while View’s stock price has surged over the past week — rising more than 15% over the past five days — it still remains more than 40% below where it initially opened trading in March.
Are you a current or former View employee? You can reach Hayley Cuccinello at email@example.com and on Twitter. Her Signal number is 1 917-740-5340. Aaron Weinman can be reached at firstname.lastname@example.org or at 929-335-1560 via secure messaging services, Signal and Whatsapp. Aaron is also on Twitter and LinkedIn.