Electric vehicle (EV) startup Canoo (NASDAQ:GOEV) — which specializes in developing lifestyle vans using its modular “skateboard” frame — has been in the news. Specifically, the company bought assets from bankrupt EV competitor Arrival (OTCMKTS:ARVLF). However, the market didn’t appreciate the announcement, sending GOEV stock down 15% today amid a challenging environment for EV manufacturers.
According to a TechCrunch article published Monday afternoon following the closing bell, Canoo touted its asset acquisition as a cost-saving measure that will ultimately reduce capital expenditures by 20%. Further, management disclosed that the assets — packed into more than 20 container ships — will be sent to the company’s facility in Oklahoma.
The EV maker didn’t specify whether the acquisition involved just physical assets or included intellectual property.
In a company statement, Canoo CEO and Executive Chairman Tony Aquila remarked, “[o]ur current strategy will save our shareholders tens of millions of dollars, which today is not properly reflected in the value of our company.”
In January, Arrival announced that it planned to sell off assets and IP from its U.K. division after filing for bankruptcy protection in the U.K. It’s a dramatic fall from grace. Once valued at more than $13 billion and backed by Hyundai (OTCMKTS:HYMTF) and United Parcel Service (NYSE:UPS), Arrival has subsequently lost almost all its equity value.
GOEV Stock Struggles Amid EV Sector Challenges
One of the main motivations behind the acquisition was the implied addition of shareholder value. Per a news release, the deal covers “a substantial portion” of “advanced manufacturing assets” at a discount of 80% or more.
Another factor to consider is that Canoo features an order book value of more than $3 billion, with enterprise-level clients that include Walmart (NYSE:WMT). In particular, Canoo has a deal in place with the big-box retailer to sell 4,500 vehicles. However, the company has struggled to convert those sales into deliveries, which factors into the volatility of GOEV stock.
To be fair, Canoo has started deliveries. For example, earlier this year, the company presented three of its LDV 130 vehicles to the state of Oklahoma. They represent the first commercial automobiles built in-state since 2006. They’re also the first batch of vehicles to come out of Canoo’s Oklahoma City facility.
However, the EV sector overall has been troubled due to multiple challenges, including stiff competition and a price war. Notably, legacy automakers have begun scaling back or delaying their EV transition plans. Further, a federal ruling giving an extended lease on life for combustion-powered vehicles doesn’t help.
Why It Matters
While GOEV stock faces many obstacles, the few analysts who cover the company believe unanimously that it’s a strong buy. The most recent “buy” rating came from Alliance Global Partners’ Poe Fratt, though a price target was not specified.
On the date of publication, Josh Enomoto 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.
