Canoo’s Q1 earnings warn that the company may be burning cash, with no short-term earnings, and may not have enough funds to continue its business.
Shares of Canoo, which fell 5% on Tuesday, were further down 17.5% in post-market trading after the earnings call. It has since recovered and is now down more than 11%.
Canoo has a tumultuous and short history. Debuting in the spring of 2019, the company’s vehicle designs have been acclaimed and made into a crowded EV startup. Just last month, Canoo was also selected by NASA to build a ground crew transport vehicle for the Artemis space exploration program.
However, Canoo has suffered lengthy problems and controversies, including internal drama, co-founder evictions, legal issues, SEC investigations and delays in production.
This latest earnings report paints an increasingly grim picture of Canoo’s future.
The EV startup, which filed a lawsuit against one of its major investors earlier this week to recoup $61 million in profits from a questionable stock deal, closed the quarter at $144.9 million in cash and cash equivalents. This means that a company with no current sales has exhausted about $120 million since the fourth quarter.
Canoo’s net loss was $125.4 million, down from $15.2 million in the same period last year, and net cash used for operating activities rose to $120.3 million from $53.9 million in the first quarter of 2021.
“Our business plan requires significant capital,” it reads. regulatory documents in canoe. “If we do not have sufficient funds or access to capital, our business plans cannot be executed and we may have to stop or significantly reduce our operations and will materially adversely affect our outlook, financial condition and results of operations.”
Canoo announced in August 2020 that it has agreed 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 investments in Public Equity (PIPE), including investments in funds and accounts managed by BlackRock.
That PIPE investment does not appear to have been realized yet. Canoo said in a call with investors on Tuesday that it expects a $300 million private equity investment in public equity (PIPE) to close this week in connection with the merger, and that the company has filed a $300 million general purpose shelf. Canoo CEO Tony Aquila said $600 million would be needed to start production.
Despite impending funding, Canoo still issued a “continue concern” warning.
Going going status means that the company may not have sufficient funds or may not be generating enough revenue to meet its due obligations. Among the upcoming production deadlines, including over 17,500 pre-orders, Canoo said Canoe will provide NASA with several custom models based on lifestyle vehicle models by June 2023. Canoo’s financial problems call into question the EV maker’s ability to deliver on these promises.
NASA did not immediately respond to requests for additional information.
When investors asked about production guidelines for NASA vehicles, Aquila avoided it, saying that while the information was confidential, Canoo was overly focused on building a plant in Bentonville, Arkansas, which is expected to produce “20,000-ish vehicles.” Canoe, said Aquila.
Canoo first announced its Bentonville plant in November last year, and at the time said it would also advance production of its lifestyle vehicles from early 2023 to the fourth quarter of 2022. These guidelines were not updated from Tuesday’s earnings announcement.
Perhaps the only bright spot in Canoo’s earnings was receiving $30.4 million as part of a settlement agreement with Dutch automaker VDL Nedcar. Canoo paid VDL Nedcar upfront as part of a vehicle manufacturing contract to build a “lifestyle EV”. The partnership ended in December as Canoo sought a new deal with VDL Groep.