Canoo’s first-quarter earnings show a company burning through cash, with no short-term revenue and a warning that it may not have enough money to stay in business.
Shares of Canoo, down 5% on Tuesday, fell another 17.5% in after-market trading following its earnings release. It has since recovered and is now down more than 11%.
Canoo has had a short and tumultuous history. The company’s vehicle designs, the first of which debuted in the spring of 2019, garnered praise and made it an EV startup. Last month, Canoo was even selected by NASA to build the ground crew transport vehicles for the Artemis space exploration program.
But Canoo has also suffered a long series of problems and controversies, including internal drama, the departure of its co-founders, legal troubles, an SEC investigation, and production delays.
This latest earnings report paints an increasingly bleak picture for Canoo’s future.
The EV startup, which earlier this week filed a lawsuit against one of its major investors in an attempt to recover $61 million in proceeds 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 spent about $120 million since the fourth quarter.
Canoo’s net loss was $125.4 million, compared to $15.2 million in the same quarter last year, with net cash used in operating activities totaling $120.3 million in compared to $53.9 million in the first quarter of 2021.
“Our business plans require a significant amount of capital,” reads a Canoo regulatory filing. “If we are unable to obtain sufficient funds or access to capital, we will not be able to execute our business plans and may be forced to terminate or significantly reduce our operations and our prospects, financial condition and results of operations could be materially affected. negatively affected.”
Canoo announced in August 2020 that it had reached an agreement to merge with special-purpose acquisition company Hennessy Capital Acquisition Corp., with a market valuation of $2.4 billion. At the time, Canoo said he was able to raise $300 million in private investments in public equity, or PIPE, including investments from funds and accounts managed by BlackRock.
That PIPE investment appears not to have been realized yet. Canoo said during a call with investors on Tuesday that it expected a $300 million private equity investment (PIPE) related to its merger by this week, with the company presenting a $300 million universal shelf. That $600 million is needed for production to begin, Canoo CEO Tony Aquila said.
Despite that looming money, Canoo still issued a “business in progress” warning.
A going concern rating means the business may not have sufficient funds or may not generate enough revenue to meet its obligations when they come due. Among other looming production deadlines, including more than 17,500 pre-orders, Canoo said it would deliver several custom models to NASA, based on its lifestyle vehicle model, by June 2023. Canoo require the EV manufacturer’s ability to meet that commitment in question.
NASA did not immediately respond to requests for more information.
When an investor asked about production guidelines for NASA vehicles, Aquila evaded, saying the information was confidential, but that Canoo was very focused on building the factory in Bentonville, Arkansas, which is expected to produce “20,000 vehicles.” for Canoo, said Aquila.
Canoo first announced the Bentonville factory in November of last year, saying at the time that it would also push the start of production of the lifestyle vehicle from early 2023 to the fourth quarter of 2022. That guidance was not updated during Tuesday’s earnings call.
Perhaps the only bright spot in Canoo’s earnings was that it received $30.4 million as part of a settlement agreement with Dutch carmaker VDL Nedcar. Canoo had paid VDL Nedcar the money in advance as part of a vehicle manufacturing contract to build his “lifestyle EV”. The partnership ended in December when Canoo explored a new deal with VDL Groep.