Canoo (GOEV 2.59%) has dreams of revolutionizing electric vehicles (EVs), bringing futuristic designs and a unique technological approach. However, the EV-maker's stock is down 99% since 2020, and for good reason.
Its financial situation is uncertain, and the company continues to dilute shareholders to fund operations. If you're thinking about purchasing Canoo stock today because of its low share price, consider the following first.
Canoo's EV dreams
Canoo is an EV company aiming to bring a unique approach to EVs with its futuristic look and advanced technology. The company has announced several vehicles as part of its lineup, including an electric van (Canoo Lifestyle Vehicle), an entry-level van (Multipurpose Delivery Vehicle or MPDV), and an electric pickup truck.
Its vehicles offer interesting technological features, like advanced telematics and subscription-based services. Packed with sensors and connectivity features, the company's vehicles would allow for real-time monitoring of driving behavior, data analysis, and software updates over the air.
Canoo produced revenue for the first time in Q3, but issues remain
The company has received pre-orders from Walmart for up to 10,000 units, and orders from Zeeba, a fleet leasing operation, and KingBee, a work-ready van fleet rental company, for 12,300 vehicles. In November, the company delivered its first electric vehicles to the state of Oklahoma, where it manufactures its vehicles, which marked a significant milestone for the EV maker.
Despite the news, Canoo is struggling to stay alive. It's trying to build a car company from scratch, which is far from easy. In the third quarter, the company generated $519,000 in revenue for the first time. This is a big feat that provides validation for the product. However, the company continues to burn cash.
In the quarter, Canoo racked up over $48 million in operating expenses, and its net loss was $112 million. Through Sept. 30, its total losses for the year were $274 million, down from $407 million from the prior year.
GOEV Revenue (Quarterly) data by YCharts.
Keep an eye on Canoo's cash situation
At the end of the quarter, Canoo has just $12 million in cash on its balance sheet, down from $40 million at the end of 2022.
The company can access capital under an agreement with Evercore and H.C Wainwright & Co. to sell shares of common stock at an aggregate sales price of $200 million through an at-the-market offering program. Through the end of Q3, it still had $148 million in remaining capacity through this program. It also has a pre-paid advance agreement with Yorkville Advisors, with $137 million in remaining capacity through this facility.
Despite this access to capital, Canoo still issued a going concern warning to investors. In its third-quarter 10-Q filing, it stated:
The Company expects to continue to incur net losses and negative cash flows from operating activities in accordance with its operating plan and expects that both capital and operating expenditures will increase significantly in connection with its ongoing activities. These conditions and events raise substantial doubt about the Company's ability to continue as a going concern.
The company's capital raises have diluted shareholders substantially since it went public via a merger with a special purpose acquisition company (SPAC) in 2020. Since then, its total shares outstanding went from around 236 million to over 726 million, a 208% increase.
GOEV Shares Outstanding data by YCharts.
Is Canoo a buy, sell, or hold?
For Canoo to operate, it must continue diluting shareholders, which will put downward pressure on its share price. It's now a measly $0.21 per share as of this writing.
The company keeps burning through cash and has its work cut out for it to ramp up production to reach commercial scale. Given the extreme uncertainty surrounding the company and questions about its ability to stay in business, I'd give the stock a sell rating and recommend looking for EV investment opportunities elsewhere.
