Canoo, another electric vehicle start-up, says it has cash flow problems
is down early Wednesday after the electric vehicle start-up reported its first quarter earnings and, more importantly, signaled that it may not be able to continue operating unless it can raise more cash .
“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,” reads the company’s first quarter filing with the Securities and Exchange Commission. “Our business plans require significant capital. If we are unable to obtain sufficient financing or if we do not have access to capital, we will not be able to execute our business plans and may be required to cease our operations or reduce them significantly.
Going concern language “is warranted when there is substantial doubt that the business can continue to conduct normal business activities for the foreseeable future without having to liquidate any part of its assets and/or restructure its obligations” , said accountant Robert Willens. Barrons.
Concretely, for investors, this means that the title could drop considerably. Without a cash injection, existing shareholders could be wiped out.
(ticker: RIDE) is another electric vehicle startup that has added this language to its filings in recent quarters.
(GOEV) was down 6% in premarket trading on Wednesday. Futures contracts on the
Dow Jones Industrial Average
futures contracts rose 1.1% and 0.8%, respectively. Entering Wednesday’s exchanges,
stocks are down more than 50% since the start of the year.
For the quarter, the company reported a loss of 54 cents per share, with no sales.
Canoo ended the quarter with approximately $105 million in unrestricted cash on its books. The company’s guidance is to spend about $200 million in the second quarter, while management has planned about $600 million in financing to help fund operations. This financing, comprising approximately $300 million in equity and up to $300 million in debt, has not yet been completed.
“As operators and investors, we have significant experience raising capital in challenging markets,” CEO Tony Aquila said in the company’s press release. “We will continue to grow where needed, achieve significant milestones and be able to take advantage of improving market conditions. We are focused on creating long-term value for our customers and shareholders.
Canoo did not immediately respond to a request for comment on what management would do if it could not provide the necessary funding.
Since raising capital via a merger with a special-purpose acquisition company, Canoo has spent about $720 million developing its electric vehicles. In the summer of 2020, when the SPAC merger was proposed, Canoo was forecasting around $329 million in sales in 2022. Current analyst estimates are around $154 million, most of which is in the fourth quarter. .
It looks like the company will need to get more cash quickly to meet those estimates.
Write to Al Root at email@example.com