Another warning that it might fail sent Canoo stock plunging nearly 27% on Friday. It came in the form of a blunt warning from company leadership….failure might be close at hand.
“Our management has performed an analysis of our ability to continue as a going concern and has identified substantial doubt about our ability to continue as a going concern. If we are unable to obtain sufficient additional funding or do not have access to capital, we may be required to terminate or significantly curtail our operations.”
That’s about as blunt a warning as one can declare. And it was more than enough to send Canoo shares tumbling 27.34% or 21 cents to close Friday at 55 cents.
“We expect our capital expenditures to continue to be significant in the foreseeable future as we expand our business,” continued the firm.
“As of the date of this report, we believe that our existing cash resources and additional sources of liquidity are not sufficient to support planned operations for the next 12 months. Our ability to continue as a going concern will depend on our ability to obtain additional capital.”
Canoo stated its management is attempting to explore raising more capital through a combination of debt financing, other non-dilutive financing and/or equity financing.
“However, as substantial doubt about our ability to continue as a going concern exists, our ability to finance our operations through the sale and issuance of additional debt or equity securities or through bank or other financing could be impaired and management cannot conclude as of the date of this filing that its plans are probable of being successfully implemented.”
In a filing with the Securities and Exchange Commission, it explained its dismal forecast to customers and shareholders.
“As of March 25, 2024, the aggregate principal balance outstanding under the Pre-Paid Advances under the PPA equal $45.0 million. Under the terms of the PPA, as of March 25, 2024, the Company has drawn down $299.9 million of the $300 million under the PPA. As such, additional capital under the PPA will not be available to the Company without Yorkville agreeing to amend the PPA or entering into a new financing arrangement.”
Canoo leadership indicated it will continue to incur operating and net losses and comprehensive losses each quarter.
“Due to various circumstances we have in the past, and may in the future, delay the launch and delivery of our vehicles, or may not be able to deliver them at all. Even if we are able to successfully develop our EVs and attract customers for our vehicle and product offerings, there can be no assurance that we will be financially successful,” they stated.
The SEC report was replete with warnings of possible failure.
“An inability to generate positive cash flow may adversely
affect our ability to raise needed capital for our business on reasonable terms, diminish supplier or customer willingness to enter into transactions with us, and have other adverse effects that may decrease our long-term viability. There can be no assurance that we will achieve positive cash flow in the near future or at all.”
It’s not just about cash flow from sales, but simply getting the cash to maintain operations.
“”We continue to explore potential sources of capital financing, but our current sources of financing remain limited. The decision regarding future sale of shares is subject to market conditions, such as trading volume, price of our Common Stock and other
factors beyond our control.”
Canoo, which moved into the Oklahoma City manufacturing plant last year and said it intended to eventually hire 500 workers, explained its financial struggles might affect contracts it had already made to provide EVs to Walmart, Zeeba and Kingbee.
“Such parties’ purchases are subject to us meeting certain acceptance and performance criteria with respect to EVs. If we are unable to meet such requirements, such parties may terminate the EV Fleet Purchase Agreements or decide to purchase fewer vehicles than expected.”
In what might be a precursor of Canoo’s inabilities to raise cash, it was reported on Friday that some workers were temporarily laid off in Oklahoma City.
Fox 25 reported 30 workers were furloughed for 12 weeks.
The financial warning came on top of Canoo’s legal problems. The company was the target of two lawsuits filed in September by two suppliers.
Tech Crunch reported the suits were filed by Jing-Jin Electric North America and Dana Limited in Michigan.
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The company reported just a little more than $19 million in total cash, of which $4.5 million was unrestricted, as of June 30, 2024.