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Canoo Sends Conflicting Messages to the Market While Reporting Cash Is Running Out

Canoo has substantial doubt about its ability to continue due to insufficient funding 13 photos
Photo: Canoo
The Canoo electric pickup is modular, "rugged" and very capable, according to the makersThe Canoo electric pickup is modular, "rugged" and very capable, according to the makersThe Canoo electric pickup is modular, "rugged" and very capable, according to the makersThe Canoo electric pickup is modular, "rugged" and very capable, according to the makersThe Canoo electric pickup is modular, "rugged" and very capable, according to the makersThe Canoo electric pickup is modular, "rugged" and very capable, according to the makersThe Canoo electric pickup is modular, "rugged" and very capable, according to the makersThe Canoo electric pickup is modular, "rugged" and very capable, according to the makersThe Canoo electric pickup is modular, "rugged" and very capable, according to the makersThe Canoo electric pickup is modular, "rugged" and very capable, according to the makersThe Canoo electric pickup is modular, "rugged" and very capable, according to the makersThe Canoo electric pickup is modular, "rugged" and very capable, according to the makers
In January, we wrote that Canoo could commit the same mistakes that killed the first iteration of Aptera and which are now troubling Tesla. Unfortunately, it seems the company is moving fast in that direction. Although the startup tries to make it look like everything is under control, it was obliged to report “substantial doubt about the Company's ability to continue.”

The 2014 FASB accounting rule demands Canoo to state that it does not have enough money to stay afloat. On March 31, 2022, it had only $104.9 million in cash and cash equivalents. In the first quarter, it lost $125.4 million, which is way more than it lost in Q1 2021: $15.2 million. At this pace, Canoo may go bust before the end of June and Canoo already said it may spend $220 million in Q2 2022 alone, so expenses may even be higher than they already were in the past quarter.

Tony Aquila tried to calm the markets by stating that Canoo has $600 million in accessible capital. The startup CEO said this money would be enough for the company to reach SoP (Start-of-Operations). He also said that Canoo has “significant experience raising capital in challenging markets.”

Half of that money would be available through “a committed PIPE from an existing shareholder and an equity purchase agreement with financing partner Yorkville Advisors.” Canoo would have also filed “a $300-million universal shelf.” Supposing that financing is certain, this amount would ensure just one year of operations at the current expenses rate. In other words, Canoo would report cash flow problems again by the end of Q2 2023.

The company said it had plans to start manufacturing by Q4 2022. Around 3,000 to 6,000 EVs would be made by VDL Nedcar. The manufacturing contract has allegedly been shelved, and Canoo would make these cars independently. That demands a lot more money than $600 million.

Canoo still tried to reinforce what could look like good news: being selected for NASA’s Artemis ground-crew-transportation vehicles, having 17,000 pre-orders worth $750 million, and 39 gamma vehicles (pre-production cars).

None of that prevented a drop in the startup’s share prices. After all, the reservations will only become revenue if Canoo is able to produce them. Even if it is, companies still lose money in the ramp-up, as Rivian and Lucid clearly demonstrate. It is a good thing that Canoo has experience raising capital: it will probably need more than $600 million to reach its goals.
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About the author: Gustavo Henrique Ruffo
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Motoring writer since 1998, Gustavo wants to write relevant stories about cars and their shift to a sustainable future.
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