Shares of Canoo (NASDAQ:GOEV) are trending and up nearly 10% today on news that the electric vehicle (EV) startup has struck an exclusive distribution agreement for its cars in Saudi Arabia.
Torrance, California-based Canoo has been given a financial lifeline by the Olayan Group, which has agreed to distribute its EVs within Saudi Arabia. In May 2022, Canoo warned it was having difficulty raising funds and it was at risk of running out of cash and ceasing operations.
Prior to today, GOEV stock had declined 77% over the last 12 months to trade at $1.27 per share, putting it deep in penny stock territory.
What Happened With GOEV Stock
In a news release, Canoo said a division of Olayan will position its electric vehicles in Saudi Arabia’s luxury goods market. The agreement covers the sale, distribution and maintenance of Canoo vehicles. Financial terms of the deal were not disclosed. However, the two companies are also planning to launch a digital vehicle ecosystem for service maintenance, local assembly and manufacturing in Saudi Arabia.
“The Olayan Group is a global business leader with decades of experience in distribution partnerships with some of the world’s leading brands and they are a proven partner to support EVs in the region,” said Tony Aquila, chairman and CEO of Canoo.
Why It Matters
Canoo has struggled to ramp up its production over the last year and warned of dwindling funds. Founded in 2017 by a former executive at BMW (OTCMKTS:BMWYY), Canoo launched its first EV in 2019, an electric van called the Canoo Lifestyle Vehicle. The company is also developing an electric pick-up truck that is scheduled for release later this year.
Canoo has received funding in the past from both Hyundai Motors (OTC:HYMTF) and Kia Motors. However, Canoo has had trouble attracting funding over the past year as markets deteriorated. The company got a break in July 2022 when Walmart (NYSE:WMT) agreed to buy 4,500 of its Lifestyle Vehicles, with an option to buy up to 10,000 in the future.
Now, the distribution deal in Saudi Arabia provides Canoo with a new market for its electric vehicles. Entry into the wealthy market could give Canoo’s future earnings a boost.
What’s Next for GOEV Stock
Investors are reacting positively to news of Canoo’s Saudi Arabia deal, bidding GOEV stock up sharply higher today. The distribution deal is certainly a positive development. However, investors should keep in mind that Canoo still has a long way to go to establish itself as a serious player in the highly competitive and increasingly fragmented electric vehicle space.
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On the date of publication, Joel Baglole did not have (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.