Canoo (NASDAQ:GOEV) stock tanked after earnings late last month. But it wasn’t the numbers that led to the plunge.

Canoo generated no revenue in the fourth quarter of 2020. It guided for a repeat in the first quarter of 2021. Of course, that wasn’t a surprise.

The electric vehicle manufacturer hasn’t yet put vehicles into production. When it announced its merger with SPAC (special purpose acquisition company) Hennessy Capital Acquisition IV in August, Canoo made clear that sales weren’t on the imminent horizon.

The numbers weren’t a surprise to anyone who was paying attention. The change in strategy was.

And it’s the change that has driven GOEV stock to the lows, and about 18% below the $10 merger price. From here, the sell-off doesn’t quite make GOEV stock a buy. But reasonable investors can disagree — and those that liked GOEV before the news should at least consider doubling down.

Canoo Before Q4

In August, Canoo detailed an aggressive strategy that, if it worked, promised to be something close to revolutionary.

The company’s Multi-Purpose Platform — often referred to as the “skateboard” — would allow for varying vehicle models to be built on top of the same underlying chassis and technology.

Other EV manufacturers have similar concepts, among them REE Automotive, which is merging with 10x Capital Venture Acquisition (NASDAQ:VCVC). But Canoo’s designs too were unique.

Its ‘lifestyle vehicle’ was supposed to be the next step in the move from minivans to sport-utility vehicles. And it looked unique, too.

Uniqute in that context doesn’t necessarily mean good — on this site, Josh Enomoto described the vehicle as having a “boxy toaster look” — but everything about Canoo’s vehicles at least seemed distinctive.

How Canoo planned to sell its cars too appeared potentially revolutionary. Canoo would offer a subscription plan — and only a subscription plan. No leases, and no ownership.

The profound changes to the industry’s regular way of doing business no doubt drove some of the optimism toward HCAC stock (which became GOEV stock after the merger). But, as I wrote at the time, those changes also created the biggest risk toward the stock. Doing so much, so fast seemed bound to court failure.

The U-Turn

Apparently, new management agreed.

On Jan. 13, three weeks after the merger closed. Canoo announced its new board of directors. Tony Aquila, a veteran entrepreneur who guided automotive insurance software developer Solera Holdings, was named as executive chairman.

The board obviously took a close look at Canoo’s strategy. It was not impressed. On Mar. 29, the same day as earnings, Canoo brought in a number of new executives. Many had worked with Aquila at Solera. Chief financial officer Paul Balciunas departed at the same time.

And on the fourth quarter conference call, Aquila announced a number of changes. Gone was the company’s plan to drive revenue through contract engineering for other manufacturers. That change has ended a partnership with Hyundai (OTCMKTS:HYMTF). It also somewhat undercuts the buzz that Canoo would wind up partnering with Apple (NASDAQ:AAPL) on that giant’s EV ambitions.

That’s far from the only change. The subscription pricing model will be optional, and likely account for only a small part of transactions. The consumer business is being de-emphasized in favor of commercial opportunities.

Simply put, GOEV now is a completely different story. And so it’s no surprise that investors who bought the old story have sold. Like Nikola (NASDAQ:NKLA), this seems another example of pre-SPAC projections falling flat, in part because SPAC sponsors are incentivized to get public instead of drive long-term value.

What The Change Means for GOEV Stock

Yet it’s worth asking: how much has the story really changed? To hear Aquila tell it, the new board has done shareholders a favor.

Indeed, Aquila threw old management under the proverbial lifestyle vehicle. He made clear on the call that he wouldn’t have approved the subscription-only strategy. He said past executives ignored the cost of intellectual property “leakage” in the Hyundai deal.

The guidance given at the time of the merger — just eight months ago — has been pulled. Aquila seemed to say that offering that guidance itself was a poor decision.

As if to underscore the criticisms, current chief executive officer Ulrich Kranz didn’t even join the call.

It’s obviously disconcerting that so much has changed since August. But Aquila certainly would argue that the changes are good. He might well be right.

The 100% subscription model seemed a bridge too far for an upstart EV manufacturer with no name recognition. The commercial market looks more attractive than its consumer counterpart. And the GOEV stock price even before the Q4 call shows that investors were largely discounting the long-range guidance anyway.

To be clear, I wasn’t a bull on GOEV stock. And to my eye, the massive upheaval in the model and in the strategy highlights the still-extant risks to Canoo and to so many stocks that went public through the SPAC process.

But everyone involved in the actual merger is gone. What’s left is a still-intriguing technology stack, new management, and a cheaper price. I can see how some bulls might see that as an improvement — even if I’m not one of those bulls.

On the date of publication, Vince Martin did not have (either directly or indirectly) any positions in the securities mentioned in this article.