GOEV Stock Is Falling Because Canoo May Not Be Able to Make EVs

Today, shares of Canoo (NASDAQ:GOEV) stock are down over 19% after the company released its first-quarter earnings report. For the period, Canoo reported a net loss of $125.4 million. It also disclosed that it had filed a $300 million universal shelf. A year ago, the company reported a net loss of $15.2 million.

Canoo (GOEV) logo displayed on smartphone screen as well as in background on yellow wall
Source: shutterstock.com/rafapress

As of Q1, this electric vehicle (EV) company has more than 17,500 preorders with a “projected value of $750 million.” Additionally, Canoo was selected by NASA to help build “Artemis ground crew transportation vehicles.”

That said, though, the company is still at risk of running out of cash. Let’s dive into the details.

GOEV Stock: Canoo Needs More Cash to Produce EVs

Canoo has been burning through its cash pile. For Q1, the company reported that net cash used in operating activities was $120.3 million, compared to $53.9 million a year ago. Canoo disclosed the following:

“Our business plans require a significant amount of capital […] If we are unable to obtain sufficient funding or do not have access to capital, we will be unable to execute our business plans and could be required to terminate or significantly curtail our operations and our prospects, financial condition and results of operations could be materially adversely affected.”

The company also warned that there is “substantial doubt about the Company’s ability to continue.”

Canoo merged with special purpose acquisition company (SPAC) Hennessy Capital Acquisition back in August of 2020. The merger provided Canoo with a $300 million private investment in public equity (PIPE). However, it seems that Canoo has yet to realize that $300 million. During a call with investors, Canoo said it should receive its $300 million PIPE this week. CEO Tony Aquila said the $300 million PIPE investment and the $300 million universal shelf are necessary to begin production.

Canoo Files Lawsuit Against Major Shareholder

On top of the Q1 news, Canoo also recently accused DD Global Holdings and its beneficiary, Pak Tam Li, of “wrongfully benefitting” from the sale of GOEV stock. Per a complaint filed on Monday, the EV company says that DD needs to pay back more than $61 million from “short swing” profits. Li was one of three investors who helped fund Canoo back in 2017. After the merger, Li held more than 26% of shares “through DD Global and other affiliates.”

Li’s stake was so large that Canoo and DD Global had to enter into an agreement with the U.S. Committee on Foreign Investment. The agreement stated that Li and DD could only own 10% or less of GOEV stock by Feb. 28, or else “transfer all of its shares to a voting trust.” Bloomberg reports that DD’s lawyer did not respond when asked to comment.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2022/05/goev-stock-is-falling-because-canoo-may-not-be-able-to-make-evs/.

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