MemberMay 19, 2022 at 10:20 am
I technically track Canoo financials for an EV
manufacturer who is releasing a new EV. They consider Canoo as a potential competitor
to a soon to be released electric SUV. Canoo, in their recent investor relations
report said, “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 Merged with a SPAC In August 2020 and
had a market cap of 2.4 billion. Now they are nearly out of money. The
calculated probability of Canoo going bankrupt (Probability Of Bankruptcy = Normalized Z-Score) has moved from 24% a few days ago
to 77% today. The current management kicked out the founders thinking they
could do a better job. Sound familiar? If you don’t think Aptera Management walks
on water, review what they have done and are doing with a few million
- This discussion was modified 1 month, 2 weeks ago by John Malcom.
MemberMay 19, 2022 at 11:21 am
I’ve been pulling for Canoo to succeed also but..um…yeah. The current differences between the two start-ups have been pretty stark so far. Your point about the similarity to Aptera part one is ironic. The ultimate bankruptcy for Canoo has already been predicted by some.
MemberMay 19, 2022 at 12:11 pm
I’m of the opinion that the absolute worst thing for a startup is to have too much money which is Canoo’s situation (they’ve raised $600M). It’s much better to have too little which is Aptera’s situation. Startups need to make quick decisions and to focus on fundamentals, that’s what watching every penny forces you to do. It’s also important to have a small team of high quality people, that’s much more effective than having a giant team of average people. Giant teams can’t optimize, the classic treatise on this is Mythical Man Month. Underfunded companies are forced to have a small tight team. Having too much money removes the discipline necessary to succeed, that seems to be Canoo’s situation. John, you’ve been watching them, how have they managed to blow through $600M so quickly? That’s a huge cash bonfire.
MemberMay 19, 2022 at 5:02 pm
That is a great question!
Of course all is conjecture since the finance/accounting data is not available even though the company is public.
The most popular explanation, again without any supportive data, is that Canoo was counting on funding and other support from the Hyundai partnership and over committed to building the US production facility, hire surge staffing in preparation for the expected work, and then when the partnership fell through had more committed than was prudent. The second part of that is that Canoo had arranged and expected to have initial production done in Europe while the OK production facility was being built out planning on early production revenue. That arrangement failed as well so then they had to acquire a short term production facility in AK and outfit it for early production to start getting operational revenue. An unanticipated and unplanned expense. Add that to the move into other facilities in AK (Probably expecting lower operating costs) and their financial over extension caught up with them.
Other thoughts are crying wolf to get current investors to ante up more money so they don’t loose what they have already invested this close to production. The Canoo schedule is almost identical to Apteras.
the least popular but still alive is that they became heady with all of the cash they got from their SPAC and didn’t pay attention to finical controls.
Another thought is that they surreptitiously want to do a Chapter 11, restructure their debt, and continue to operate.
And almost an infinite number of others!!😜 much like American politics.
Does make you appreciate the management of Aptera a lot more.
- This reply was modified 1 month, 2 weeks ago by John Malcom. Reason: add content and corrected grammar
MemberMay 19, 2022 at 6:05 pm
Thanks, that was an informative answer. Unfortunately the market is tanking and when that happens investors would rather lose it all rather part with any new money. In 2009 I had a customer that had really important supercomputer technology. They ran out of cash and they were forced into liquidation. Intel had put $40M into them but they weren’t willing to spend a penny at that moment. Huawei swooped in and bought their assets for $2M and hired their team, these were assets that had taken $80M to develop. CFIUS (the US government committee on foreign investment in the US) got wind of it and made them disgorge the IP, not that it mattered because it had probably all been transferred to China within minutes of Huawei’s purchase. Intel lost their $40M investment rather then spend the lousy $2M it would have taken to bring it in house, but it was 2009 and they weren’t spending money, if they had bought the assets it would be in their cloud products today.
- This reply was modified 1 month, 2 weeks ago by Joshua Rosen.
MemberMay 19, 2022 at 6:21 pm
That is a discouraging story but I suspect not uncommon and typical of the way the financial people think. Results in lost opportunities and advantage to the competitors
MemberMay 20, 2022 at 7:27 am
It’s also illustrative of how the Chinese handle situations like this. While no one in the US was willing to step up Huawei pounced. The same thing happened to the Aptera Rev 1, the assets were bought by a Chinese company, that didn’t work out for them but the battery maker A123, which had it’s assets bought by Wanxiang, is still around and doing well.
One final thing about the Huawei story. Huawei tried to do an end run around our laws. Acquisitions by a foreign company have to be approved by CFIUS. Rather than apply for permission to buy the company Huawei bought the IP and hired the engineers without buying the company itself. CFIUS found out and made them give away the IP, in CFIUS’s eyes if it walks like a duck and quacks like a duck it’s a duck i.e. they had bought the company without playing by the foreign acquisition rules.
MemberMay 19, 2022 at 12:16 pm
It’s not clear that Aptera will IPO or take the SPAC route. In one of “Aptera Owners Club” videos of the SEC filing, I recall seeing the CFO’s potential bonus options; one of them included getting a valuation of 1-2B or completing a SPAC transaction.
Edit: Aptera Owners Club just posted a video about the EV cash burn problem – he covers a Barrons article
MemberMay 19, 2022 at 1:29 pm
I have been following Canoo for awhile and had been planning on buying one for my wife. When I saw the original founders leaving, I cancelled my purchase, feeling that (not being a financial specialist) something fell apart in the well being of the company. I was nearly as jazzed up for the Canoo as I am for the Aptera. Canoo has nearly 40 Delta vehicles and some great contracts that may go unfilled. I dearly hope that we do see Apteras on the road with thousands of people driving them.