With electric-vehicle (EV) maker Canoo (NASDAQ:GOEV) seemingly in turmoil and abandoning its most promising, unique ideas, investors should stay away from GOEV stock at this point.
More specifically, at least two of Canoo’s top executives have recently left the young company, while it has largely abandoned its subscription payment model idea. Also largely discarded is its effort to provide “engineering services” to other automakers, with its previous partnership with Hyundai (OTCMKTS:HYMTF) seemingly abandoned. Finally, the company is now emphasizing a commercial delivery EV, instead of its more differentiated spacious van.
Paul Balciunas, Canoo’s former CFO, and Alex Marcinkowski, its one-time head of corporate strategy, have left the company recently, Roth Capital analyst Craig Irwin said on the company’s fourth-quarter earnings conference call, held on March 30.
Further, Ulrich Kranz, Canoo’s CEO, did not speak on the conference call. That’s a highly unusual move for a startup company, and it leads me to believe that Kranz could also potentially be on the way out. The company’s chairman, Tony Aquila, who led the call, suggested that Kranz did not speak in the conference because it originated from Dallas, instead of California, due to the lockdown in the latter state. But I find it difficult to believe that the CEO was unable to fly to Dallas or call in via a video-conference platform.
Sometimes multiple top executives leave a company because it is struggling. On the other hand, the departures may be due to Aquila’s appointment as the company’s executive chairman last October and his desire to “bring in his own people,” as the old expression goes.
Indeed, Aquila implied during the conference call that he wants to bring in people with whom he’s worked closely in the past. He also suggested that he’s seeking to hire executives with more experience working at publicly traded companies.
Those factors, rather than problems at Canoo, may indeed be the reason for the high turnover among the company’s top managers. But at the very least, given the company’s newness (it was founded in December 2017) and tough competition, the turnover is likely to lead to execution difficulties and uncertainty for at least the next year.
“It was decided by our Board to de-emphasize the originally stated contract engineering services line,” Aquila revealed on the Q4 call. The executive chairman also stated that less than 20% of Canoo’s sales would be generated from subscriptions. Previously, the company had said that it would sell its first electric vehicle on a subscription basis only.
Finally, Aquila stated that the company would now be primarily looking to sell delivery vehicles instead of its uniquely spacious van for consumers. The Verge stated that the deal to develop EVs with Hyundai “appears dead,” as its investor presentation contained no mention of the arrangement with the Korean automaker. Further, Aquila repeatedly stated that he was worried that cooperating with other automakers would result in Canoo losing the value of some of its intellectual property.
I view Aquila’s changes negatively. He appears to be eliminating or deemphasizing most, if not all, of the differentiating factors that Canoo previously had, including its collaboration with Hyundai, its cancel-at-any-time subscription model and its extra-spacious van.
At the same time, Canoo is starting to focus on the increasingly crowded commercial EV delivery space. Among the well-funded companies in the space in some capacity are Rivian, Ayro (NASDAQ:AYRO), Workhorse (NASDAQ:WKHS), Arrival (NASDAQ:ARVL), General Motors (NYSE:GM) and Ford (NYSE:F).
The Bottom Line on GOEV Stock
Canoo appears to be entering a chaotic period, and it seems to be largely or completely abandoning the vast majority of its points of differentiation. Meanwhile, the company is entering the highly competitive EV delivery market.
Given these points, and with GOEV stock still trading at a rather high market capitalization of $2 billion, I recommend that investors sell the EV maker’s shares.
At the time of publication, Larry Ramer held long positions in AYRO, ARVL and GM.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.