Electric vehicle startup Canoo warned investors on Tuesday that its current cash position may prevent it from meeting its financial obligations and remain in business.
“As of the date of this announcement, we are reporting that there is substantial doubt about the Company’s ability to continue as a going concern,” Canoo stated in its first quarter earnings report.
Dwindling cash hoard
The company has enough cash to last into the next quarter, $104.9 million in cash and cash equivalents at the end of March. But it’s noticeably less than the $120.3 million Canoo incurred in operating expenses during the first three months of the year, up from $54 million in the same period a year ago.
The news sent Canoo’s stock price down 16% to $3.05 a share in early trading Wednesday, a decline of more than 67% from its all-time high of $20.28 in December 2021.
“We have been clear about our philosophy of raising capital judiciously and will continue with this disciplined approach,” said Tony Aquila, investor, chairman & CEO at Canoo, in a statement. “We have more than $600 million in accessible capital to support start of production.”
The capital includes $300 million in funding from an existing shareholder and a $300 million equity purchase agreement with Yorkville Advisors.
“We will continue to raise when needed,” Aquila said.
But what about the cars?
Canoo said that the company has 39 vehicles in Gamma testing and more than 17,500 preorders with a projected value of $750 million.
The company plans to begin manufacturing its EVs in the fourth quarter of this year, although company isn’t positive it will be able to produce the projected 3,000 to 6,000 units. Production will take place at its Bentonville, Arkansas and Pryor, Oklahoma facilties, for which the automaker received $300 million in financial incentives from the state of Oklahoma.
Nevertheless, consumers can reserve one of Canoo’s vehicles for $100. The vehicle will be available as a subscription, including maintenance, insurance, taxes and registration fees. The company’s Lifestyle Vehicle expected to be the first of the three vehicles built, which includes the MPDV van and Pickup Truck. Canoo’s electric drivetrain provides 300 horsepower and 332 pound-feet of torque and 250 miles of battery range.
But a number of difficulties has hobbled the nascent EV maker during 2021.
A rocky start for the startup
Originally launched under the name Evelozcity in 2017 by former BMW and Faraday Future executive Stefan Krause, the company was sued by Faraday Future for allegedly poaching employees and stealing trade secrets. The lawsuit was settled in 2018.
Since then, things seemed to progress smoothly until 2021, when the U.S. Securities and Exchange Commission launched an investigation the day after the company began taking vehicle deposits as a result of a reverse merger with special purpose acquisition company Hennessy Capital Acquisition Corp.
Canoo also had been discussing the possibility of contract manufacturing its vehicles with the Netherlands-based VDL Nedcar in June. But those talks were discontinued due to supply chain concerns. The company now plans to build all of its vehicles in the U.S.
The company also suffered from a number of departures among its key executives late last year, including Mike de Jung, among the firm’s earliest employees and closely associated with Canoo’s Chief Design Officer Richard Kim. Also gone is Nicolas Leblanc, Canoo’s vehicle program lead, as well as Richard Walker, who oversaw software controls, and Steven Offutt, director of powertrain and battery manufacturing engineering.
The losses compound the exodus of others, including that of chief executive officer and company co-founder, Ulrich Kranz, who left to join Apple’s car project, as well as the company’s chief financial officer, chief marketing officer, and general counsel.
But the news hasn’t all been bad.
In April 2022, NASA tapped Canoo to build Crew Transportation Vehicles, or CTVs, for its manned Artemis lunar exploration launches. The all-electric LV models are due to be delivered to NASA by June 2023 — if the company survives.
On a more contentious note, Canoo filed a lawsuit in Manhattan Monday against Cayman Island-based DD Global Holdings Ltd., its second-largest shareholder. The lawsuit is seeking more than $61 million in so-called “short swing” profits, which under contract must be returned. The lawsuit contends that DD Global Holdings wrongfully benefited from its recent share sales.