The U.S. Securities and Exchange Commission (SEC) issued a $1.5 million fine against electric vehicle company Canoo Inc. on Friday, citing reporting failures related to substantial and unreasonable revenue projections. The SEC alleged that Canoo, former CEO Ulrich Kranz and former CFO Paul Balciunas, misled investors about the company’s financial prospects prior to its public merger with a special purpose acquisition company in December 2020.
Leading up to the merger, Canoo projected revenue figures of $120 million in 2021 and $250 million in 2022 based on deals to provide engineering services to other companies. In March 2021, the company’s stock dropped by 21% after it announced that it would not achieve the anticipated revenue targets, as stated by the SEC in court documents.
Canoo did not admit to wrongdoing in the settlement. The company said in May that it reached a tentative deal with the SEC to end the investigation, which began in April 2021.
The SEC also settled with Kranz and Balciunas. Kranz agreed to be barred from serving as an officer or director of public companies for three years and to pay a $125,000 fine. Balciunas agreed to a two-year bar, pay a $50,000 fine and return $7,500 in profits. The SEC said Kranz and Balciunas knew before the merger that the projects were unlikely to generate revenue.
The regulator also alleged that Kranz failed to disclose more than $900,000 in compensation he received from two Canoo investors in October 2020 to stay with the company.
Daniel Wachtell, an attorney for Balciunas, said his client was pleased to have the matter resolved. An attorney for Kranz declined to comment.
Canoo said in May that it had tentatively agreed to pay a $1.5 million penalty to settle the SEC investigation.
The Texas-based company warned investors in May that it might not be able to meet its financial obligations, saying it had access to $600 million in funding but added it had “substantial doubt” about continuing as a going concern. The carmaker is scheduled to report its second quarter results on Aug. 14.
Canoo’s stock peaked at $20.28 per share around its public debut in December 2020, but has since declined, trading below $1 per share since February.