Canoo’s first quarter results show a company is going through cash, no short-term earnings, and a warning that it may not have enough cash to stay in business.
Shares of Canoo, which fell 5% on Tuesday, fell another 17.5% in aftermarket trading after the earnings announcement. It has since recovered and is now down more than 11%.
Canoo has a tumultuous and short history. The company’s vehicle designs, the first of which debuted in Spring 2019, garnered acclaim and turned it into a thriving EV startup. In fact, last month, Canoo was selected by NASA to build the ground crew transport vehicles for the Artemis space exploration program.
But Canoo has also faced a long line of issues and controversies, including internal drama, the departure of its co-founders, legal issues, an SEC investigation and production delays.
This latest earnings report paints an increasingly grim picture for Canoo’s future.
The EV startup, which filed a lawsuit against one of its major investors earlier this week in a bid to recover $61 million in profits from allegedly suspicious stock transactions, closed the quarter with $104.9 million in cash and cash equivalents. That means the company, which currently has no revenue, has consumed about $120 million since the fourth quarter.
Canoo’s net loss reached $125.4 million, compared to $15.2 million in the year-ago quarter, with net cash used in operating activities totaling $120.3 million, compared to $53.9 million in the first quarter of 2021.
“Our business plans require a significant amount of capital,” reads a regulatory filing from Canoo. “If we are unable to obtain adequate financing or access to capital, we will be unable to carry out our business plans and may be required to discontinue or materially curtail our operations and alter our prospects, financial condition and operating results can be material. adversely affected.”
Canoo announced in August 2020 that it had reached an agreement to merge with Hennessy Capital Acquisition Corp., a special-purpose acquisition company with a market value of $2.4 billion. At the time, Canoo said it was able to raise $300 million in private equity investment, or PIPE, including investment from funds and accounts managed by BlackRock.
It appears that PIPE’s investment has not yet been realised. During a meeting with investors Tuesday, Canoo said it expected a $300 million private investment in public equity (PIPE) related to the merger to go through this week, and the company has filed a $300 million universal shelf. That $600 million is needed to start production, said Tony Aquila, CEO of Canoo.
Despite that looming money, Canoo still issued a “going concern” warning.
A “going concern” qualification means that the company may not have enough money or generate sufficient income to meet its obligations when they fall due. Among other approaching production deadlines, including more than 17,500 pre-orders, Canoo said it would deliver multiple custom models to NASA by June 2023, which should be based on its lifestyle vehicle model. Canoo’s financial concerns call the EV maker’s ability to live up to that commitment into question.
NASA did not immediately respond to requests for more information.
When an investor asked about production guidelines for the NASA vehicles, Aquila dodged, saying the information was confidential but Canoo was hyper-focused on building the plant in Bentonville, Arkansas, which is expected to produce “20,000-like vehicles” for Canoe, Aquila said.
Canoo first announced its Bentonville plant in November of last year, saying it would also shift the start of production of the lifestyle vehicle from early 2023 to the fourth quarter of 2022. That forecast was not updated during Tuesday’s earnings call.
Perhaps the only bright spot in Canoo’s earnings was the fact that it received $30.4 million as part of a settlement agreement with Dutch car manufacturing company VDL Nedcar. Canoo had prepaid VDL Nedcar as part of a car production contract to build its ‘lifestyle EV’. The collaboration ended in December when Canoo investigated a new deal with VDL Groep.