Skip to main content

Huge Rental Company Places Big Order With Tesla Rival

Shares of the electric vehicle maker soar after news of a deal with a van rental company.
  • Author:
  • Publish date:

May wasn't a very merry month for Canoo  (GOEV) - Get Free Report.

Back then, the electric vehicle company was in some serious trouble. 

Canoo warned investors earlier in 2022 "that there is substantial doubt about the company's ability to continue as a going concern." 

The company posted a net loss of $125.4 million for the first quarter, widened from $15.2 million in the first quarter of 2021. Canoo has also struggled to meet its production target for 2022.

There was some speculation that Apple  (AAPL) - Get Free Report might make a move on Canoo.

August had some serious dog days, too, for Canoo.

'Can Least Afford This'

On Aug. 9, Roth Capital analyst Craig Irwin downgraded the company to neutral from buy and slashed his price target to $3.50 from $7 after Canoo posted a wider than expected second-quarter loss and management pushed out expectations for commercial deliveries.

Irwin said he expected the delayed start for commercial deliveries to increase cash needs by over $150 million at a time when management "can least afford this" with $33.8 million in available cash exiting the second quarter and the balance sheet "already in a precarious position," he said in a research note.

But then were glimmers of hope. Retail giant Walmart  (WMT) - Get Free Report offered Canoo a lifeline, ordering 4,500 of its electric vans with an option to buy thousands more. 

The company announced in November 2021 that it had selected Bentonville, Ark., Walmart's home town, as its headquarters and that it will establish an R&D center and an advanced industrialization and low-volume production facility for small package delivery vehicles in the state.

'Most Profitable Segments'

Financial ties between Alice Walton—daughter of the late Walmart founder Sam Walton—and Canoo’s chief executive, Tony Aquila, have been the subject of an investigation by Fortune.

Court documents filed in Illinois federal court this week formally link Alice Walton and the Walton Family Office to AFV Partners, Aquila’s personal private equity firm that owns a minority stake in the electric vehicle company, Fortune reported.

Things looked a little brighter when Stifel analyst J. Bruce Chan initiated coverage of Canoo in August with a buy rating and $4 price target.

The analyst said he was encouraged by Canoo's focus on "the most profitable automotive market segments," namely, compact SUVs, pick-up trucks, and last-mile delivery.

Canoo is able to carry nearly 60% of its outstanding cost to its next model variant through its multi-purpose platform architecture and is attempting to capture value across the entire vehicle lifecycle, which Chan called "notably different from peers and entrenched OEMs".

New Deals

Last week, Canoo said it had signed an agreement with Zeeba, where the national fleet leasing company would purchase 5,450 American-made electric vehicles, with an initial binding commitment of 3,000 units through 2024.

In addition, Zeeba will add Canoo Lifestyle Delivery Vehicles and Lifestyle Vehicles to its long-term fleet leasing portfolio.

And then on Oct. 17, Canoo announced a binding order for 9,300 electric vehicles from Kingbee, a national work-ready van rental company based in West Valley City, Utah, with an option to increase to 18,600 vehicles.

The company declined to provide terms of the order.

"This order is yet another key milestone as we allocate production capacity for the coming years,"  Aquila said. "New and legacy innovators recognize a need for safety, efficiency and productivity in their fleet portfolio."

Shareholders reacted well to the announcement, as shares of Canoo were soaring 18% to $1.50 at last check. The stock had tumbled nearly 70% in the last three months.