EV firm Canoo accepts SEC settlement of $1.5M

The U.S. and electric vehicle company Canoo have reached a $1.5 million settlement. Securities and Exchange Commission, per a legal document.

Just a few months after the business joined with special purpose acquisition firm Hennessy Capital Acquisition Inc., the SEC launched an investigation into Canoo. The inquiry looked into Canoo’s operations, company model, revenues, revenue strategy, client agreements, earnings, and more. It also looked into Hennessy’s initial public offering and merger with Canoo. It also covered the resignations of certain top corporate officials, including Ulrich Kranz, the co-founder and CEO.

As part of its fourth quarter and full year 2022 financial report, Canoo announced the news on Thursday. After hours, the announcement caused the company’s stock price, which closed Thursday at $0.62, to drop by about 10%.

The SEC had begun looking into many EV SPACs, including Lordstown Motors, Arrival, Nikola, and Faraday Future. Canoo was one of these companies.

Canoo did not provide many details regarding the SEC probe, although the $1.5 million did appear on the company’s fourth-quarter balance sheet.

A pre-revenue firm called The EV SPAC has frequently warned that it is running low on cash and needs to raise more money to stay in the game. The United States did receive Canoo’s first light tactical vehicle. Army in the fourth quarter for a demonstration, but given the company’s losses, the contract’s value is only $67,600, which isn’t exactly a significant sum. Canoo agreed to sell 50 million shares in February for $1.05 per share, representing a 16% discount. The offering’s total gross income was about $52.5 million.

That financial boost doesn’t seem to be enough to turn Canoo into a company that generates income. With only $36.6 million in cash and cash equivalents at year-end 2022, the corporation. Since the company had a net loss of $80.2 million in the fourth quarter ($487.7 million for the entire year), more funding will probably be required to meet any Q1-only expenses. By the way, that deficit was down from $138 million in Q4 2021 on a quarterly basis. Nonetheless, Canoo concluded 2021 with a net loss of $346.8 million, an increase of more than 40% from the previous year.

On its earnings call on Thursday, Canoo stated that it was looking into various funding sources that it will reveal over the following few quarters. Tony Aquila, CEO of Canoo, highlighted that applying for funding from the Department of Energy’s loan program, for instance, was challenging due to “legacy concerns” including messy executive shakeups and the now-completed SEC inquiry.

When we begin to create the track record of this management team, our prospects to acquire financing are now exponential, according to Aquila.

Aquila is obviously attempting to convince investors that Canoo’s problems are a result of problems with previous management teams. Aquila took over as CEO in 2021, and since then claims that Canoo has changed from a firm with a “new business model” that involves on-shore manufacturing to one with a corporation that offers a single product. Moreover, Canoo just hired Tony Elias as the new EVP of operations and Ken Magnet as the new chief financial officer.

Hopefully, it will be sufficient to make this electric ship turn. Canoo reported negative adjusted EBITDA of $60 million for the fourth quarter of 2022 and negative $408.6 million for the entire year. During the fourth quarter of 2021 and the entire year, the figures were negative $120 million and negative $332.6 million, respectively.

Q1 2023 outlook for Canoo
Canoo stated that it anticipates Q1 operating expenses (excluding stock-based compensation and depreciation) to be in the range of $55 million and $70 million, and capital expenditures to be in the range of $30 million and $45 million.

As 2023 approaches, Aquila said in a statement, “We are focusing on opening up our facilities, growing production, and aligning with our strategic distribution partners for our global expansion.”

In order to bring its Lifestyle Delivery Vehicle and Lifestyle Vehicle SUV to market in 2023, Canoo is establishing an EV battery module facility and a car manufacturing facility in Pryor and Oklahoma City, respectively. Oklahoma offered Canoo $400 million in incentives to locate there and promised in March to purchase 1,000 Canoo EVs, but the state has the option to revoke those commitments at any time.

As part of its initial international growth, Canoo also inked an exclusive distribution contract with GCC Olayan in January for automobiles sold in Saudi Arabia.

During the earnings call on Thursday, Aquila stated that Canoo believes it can achieve a 20,000 run rate exit for the year. The corporation claims that this year’s total orders, which have a value of almost $2.8 billion, have increased by 300%.