Space continues to shrink for midsize electric vehicles. Canoo, a seven-year-old electric vehicle startup, filed for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code and announced it would cease operations immediately. A press release states that the liquidation process is overseen by the bankruptcy trustee in the Delaware Bankruptcy Court.
Canoo Inc., which was listed on the Nasdaq Composite Index under the stock symbol GOEV, is a well-known player in the electric vehicle market, especially in the electric freight field. Despite partnerships with NASA, the Department of Defense, the U.S. Postal Service, the state of Oklahoma, Walmart and other organizations, the company has struggled to secure financial support to stay afloat.
The bankruptcy filing cited failed attempts to obtain financing from the U.S. Department of Energy's Office of Loan Programs as a significant factor in Canoo's bankruptcy. Efforts to obtain capital from abroad also failed to stave off bankruptcy. Canoo has total liabilities of more than $164 million and assets of approximately $126 million.
"We would like to thank the company's employees for their dedication and hard work," said Chairman and CEO Tony Aquila. "We know you believe in our company as much as we do. We are truly disappointed with how things turned out. We would also like to thank NASA, the Department of Defense, the U.S. Postal Service (USPS), the State of Oklahoma and Walmart for their trust in our products and company. This means a lot to everyone in the company.”
Prior to its bankruptcy, Canoo faced numerous challenges that added to its financial instability. In the final months before filing, the company laid off its remaining employees and idled its Oklahoma City plant. Despite having a deal to supply electric vans to high-profile customers, Canoo has struggled to ramp up production and secure wider market adoption. The company's third-quarter financial report showed continued net losses, with a GAAP net loss of $112 million for the nine months ended September 30, 2024, compared with $273 million in the same period a year earlier.
Executive departures and a strategic focus further exacerbated operational woes. In October, Chief Financial Officer Greg Ethridge and General Counsel Hector Ruiz resigned and were replaced by internal promotions. Under Aquila's leadership, Canoo shifted its focus from consumer sales to commercial fleets, which involved multiple shifts in production strategy and operational adjustments. These changes have increased operating costs and eroded investor confidence.
Financial mismanagement also contributed to Kanu's downfall. The company borrowed significant amounts of money from Aquila's financial firm, including a loan of about $1.2 million at an 11% interest rate and later borrowed an additional $2.7 million, regulatory filings show. The loans are secured by assets at Canoo's Oklahoma City plant, putting additional pressure on the company. Additionally, Canoo's attempts to comply with Nasdaq listing requirements through a reverse stock split were not enough to reverse its financial trajectory.
The company's liquidation proceedings involve an insolvency trustee managing the sale of Canoo's assets to repay creditors. Stakeholders, including employees, suppliers and investors, will receive proceeds from the liquidation of assets based on their claims. Canoo's decision to enter Chapter 7 reflects the company's inability to restructure its debt and continue operating.
Canoo's bankruptcy reflects broader trends and challenges in the electric vehicle industry. The market is witnessing a series of startup failures, particularly those that went public through mergers with special purpose acquisition companies. In recent years, companies like Electric Last Mile Solutions, Fisker, Lordstown Motors, Proterra, Lion Electric and others have faced struggles ranging from bankruptcy to restructuring. Last March, Arrival sold its assets to Canoo
For the EV start-up ecosystem, volatility has been a recurring theme amid fierce competition and high operating costs that require significant capital to develop technology, scale production and achieve market penetration.
The liquidation of Canoo's assets could have knock-on effects on its supply chain and partnerships. The supplier has sued over unpaid bills, with Kistler Instruments seeking $56,000 in damages. For its part, Walmart is not expected to cease operations as the deal is a non-binding agreement to purchase thousands of electric vehicles.
Canoo's liquidation could provide asset acquisition opportunities for other players in the EV market. Canoo has developed innovative technologies including steer-by-wire systems and modular vehicle platforms that could be valuable assets to rivals looking to bolster their technological capabilities.
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