The next few months will be decisive for Canoo (GOEV) , the upstart manufacturer of electric vehicles.
Its horizon, like that of most car manufacturers, is currently clouded by a cascade of problems.
Semiconductor shortages are getting worse, supply-chain disruptions continue with lockdowns in cities across China, and raw-materials prices remain high due to the Russian invasion of Ukraine.
These three factors increase the cost of manufacturing vehicles and, above all, completely disrupt production, forcing automotive groups to review their initial projects.
For industry disruptors like Canoo, the current rout in the financial markets due to heightened recession fears is also bad news. That's because the fall in the equity markets indicates that investors are even more cautious about betting on companies that are currently not generating profits and therefore do not distribute dividends.
This is the case with Canoo, which promises growth in return for investors' faith and funds. This promise might not be enough in the current context.
Canoo Soon May Run Out of Money
The Torrance, Calif., company has just warned that it runs the risk of running out of money in coming months.
"Due to the timing of our announced funding, and the 2014 [Financial Accounting Standards Board] accounting rule, as of the date of this announcement, we are reporting that there is substantial doubt about the company's ability to continue as a going concern," Canoo warned investors on May 10 when it released its first-quarter earnings.
"Substantial doubt" is an expression that listed companies are required to place in their financial disclosures when they are not certain that they can meet their financial obligations within the next 12 months.
"To sit here and say for sure we can pay our bills in 12 months, that depends on so many factors when it comes to prerevenue and stuff,” Chief Executive Tony Aquila told Fox News.
Canoo posted a net loss of $125.4 million for the first quarter, widened from $15.2 million in the first quarter of 2021.
The electric-truck maker said it anticipates operating expenses (excluding stock-based compensation and depreciation) of $95 million to $115 million for Q2. Capital expenditures should be between $85 million to $105 million in the current quarter.
Canoo needs at least $180 million to fund its operations in the current quarter. The group said it had only $104.9 million of cash on hand.
Aquila tried to reassure investors that Canoo had access to fresh capital.
"To start, we entered into a $250 million equity-purchase agreement with financing partner Yorkville Advisors," the CEO told analysts during the earnings' call.
"Next, we have a commitment for a $50 million [private investment in public equity] from an existing shareholder, further demonstrating long-term support and belief in the company.
"We also filed a $300 million shelf, bringing our total accessible capital to $600 million, optimizing our financial needs to [start of production].
"We are in ongoing discussions with parties for additional financing as it makes sense based on our disciplined approach to managing our execution plan."
Apple May Make an Offer
Canoo is also struggling to meet its production target for 2022. The automaker had pledged to produce between 3,000 and 6,000 vehicles in 2022. As of March 31, only 39 vehicles have been produced and 17 are on the road. And given continued disruptions to supply chains, doubts about its production target have arisen.
"Supply-chain issues have worsened, especially as things have heated up on the geopolitical arena. We are still in process of securing on-time delivery of 26% of the semiconductor chips needed" to start production, Aquila said during the call.
"We expect to hit [start of production] in Q4 2022. What remains is whether we will hit our full target of 3,000 units to 6,000 units is still remaining open," the CEO added.
Press reports speculate about a takeover of the company by Apple (AAPL) , which is currently working on its own vehicle project.
According to Bloomberg, Apple and Canoo have had discussions in the past. Ulrich Kranz, former CEO of Canoo, is one of the top executives on the Apple Car Project.
The Cupertino, Calif., tech giant is particularly interested in Canoo engineers for their expertise in software, automotive manufacturing, drive trains, battery technology, and car interiors and exteriors.
Apple didn't immediately respond to a request for comment.
Canoo hasn't yet responded to the speculation.
Canoo: Models and Specifications
Founded in 2017, Canoo develops electric cars. One of its creations is an innovative multifunction minivan, the prototype of which was unveiled in 2019. Its sleek and futuristic design, coupled with its multiple functionalities, had drawn attention a lot of attention. Called the Lifetsyle, it's Canoo's most popular vehicle.
The passenger space at the rear particularly drew attention, with a bench seat curved like a sofa and a vast central space.
The car will be available in four configurations: Basic, Premium, Adventure and Delivery. The first two are designed for comfortable city journeys, with their layouts of five to seven seats, a panoramic glass roof, and side windows enveloping the entire cabin at the rear.
The other two models are intended for specific contexts.
The Adventure will be a dark green, more rugged version of the classic model. It can be converted into a pickup version.
The Delivery lacks the rear bench seat to free up space. It'll thus be closer to a classic utility vehicle, with a more rectangular shape and without the panoramic windows.