Canoo, the EV startup that struck a deal with the world’s largest retailer, is a mess under the hood

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The push for the use of electric vehicles in the United States is intensifying. Especially in California, where the state just banned gas-powered cars by 2035. Tony Aquila, the CEO of Canoo, a public electric vehicle company, is certain he can compete with brands like Tesla. But there’s a hurdle: Canoo has yet to generate revenue.

Walmart signed a agreement with Canoo in July to purchase 4,500 all-electric delivery vehicles, starting with the Lifestyle delivery vehicle, with the option to purchase up to 10,000 units. But the company is “hanging by a thread,” writes my colleague Jessica Mathews.

“Into the chaos of Canoo, the zero-revenue, cash-intensive electric vehicle company that just signed a major deal with Walmart,” is the new report from Mathews that provides insight into the inner workings of the based startup. in Bentonville, Arkansas.

Canoo said in its Q2 2022 revenue report the company has “over $1 billion” in its sales pipeline. But it posted a net loss of $164.4 million, compared to $112.6 million in the second quarter of last year.

August 8 earnings call, Ramesh Murthy, Acting Chief Financial Officer and Chief Accounting Officer, spoke of the “path to profitability”. Murthy said: “It’s becoming increasingly clear to everyone that our philosophy around cash flow and access to capital is in line with what a technology-driven company would do. We focus on milestones and events on how we access capital on our path to profitability. By focusing on milestones and key events, we can deliver lasting value to the business and all of our stakeholders. »

Mathews interviewed Aquila in June and rode in one of Canoo’s futuristic electric motorhomes.

“Canoo’s vehicles were still going through test programs and not yet on the market,” she writes. “Production would not begin until at least the end of 2022, and the company had not begun construction of its own manufacturing facilities. (The van we were sitting in was a prototype.)”

She continues, “Canoo had just signed a deal with hedge fund Yorkville Advisors to sell up to $250 million of its shares at a discount to their already depressed market price. The Securities and Exchange Commission was investigating the company over its 2020 SPAC merger, and the company was tied to three legal wrangles, including two class action lawsuits by retail investors in its stock. Indeed, right there in an SEC filing of March, 31stCanoo himself had said he might not survive another year.

“And yet Aquila – the 57-year-old tattooed private equity executive who had started taking over the company in 2020 – looked me straight in the eye when I asked if Canoo had the funding he needed. needed for next year.”I’m a just-in-time capital guy,” he assured me.Mathews also discovered that Walmart’s purchase of yet-to-be-produced electric vehicles isn’t the first financial boost Aquila received from the Walmart family in his career.

Automakers are now required to steadily increase sales of zero-emission cars in California, the nation’s largest auto market. And because 17 other states generally follow California’s auto emissions standards, last week’s vote by the California Air Resources Board could go far beyond the state, forcing the auto industry to accelerate its move. to electric cars, Fortune reported.

As the electric vehicle market continues to evolve, “Canoo isn’t the only electric vehicle startup to have taken investors and employees on a wild ride over the past two years,” writes Mathews. “Concern over climate change has drawn an unprecedented amount of investor capital into space, but the logistical challenges of launching an automaker from the ground up are no less daunting.”

But, “Crack open the hood even an inch, however, and it’s clear that, even with the Walmart deal, Canoo is floundering to an extreme degree,” writes Mathews. (You can read the full article here.)


Until tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

Big deal

Deloitte CFO Signals Q3 Survey released today revealed that, overall, nearly half (46%) of CFOs expect the North American economy to be in recession by the new year. But it also varies by industry. For example, 67% of CFOs in the energy and resources sector expect a recession in North America by 2023, compared to 52% of CFOs in manufacturing, 50% in technology, 48% financial services and 25% health care. CFOs are pursuing recession-proof measures such as cutting operating expenses, controlling headcount and reprioritizing capital spending. However, CFO concerns about inflation far outweighed recession concerns. CFOs have lower expectations for year-over-year revenue growth – 6.2% this quarter, compared to 7.8% in the second quarter of 2022. Meanwhile, earnings growth expectations are 6.4%, down from 8.4% in the previous quarter. Deloitte’s quarterly CFO survey findings are based on a survey of 112 CFOs (74% public companies and 26% private companies). Respondents come from the United States, Canada and Mexico, and the vast majority are from companies with annual sales of more than $1 billion.

Go further

“Generation Xers are cutting everything because of inflation, except retirement savings,” said one Fortune Alicia Adamczyk’s report, is an analysis of State Street Global Advisors’ recent Inflation Impact Survey. As Gen Xers approach retirement, they are “significantly” more concerned about rising prices than Millennials or Baby Boomers.

Ranking

dave mckinstray was appointed Chief Financial Officer of North America Cereal Co., the upcoming spin-off from Kellogg Company (NYSE: K). As announced in June 2022, Kellogg Company plans to separate three of its businesses – Global Snacking Co., North America Cereal Co. and Plant Co. McKinstray has held several CFO positions during his nearly 15 years at Kellogg, such as CFO of the United States. Snacks and CFO of US Retail Sales prior to his current role as Vice President of Integrated Business Planning. His roles before Kellogg included positions in risk management and commodity trading.

Christopher Pachler was appointed Chief Financial Officer of FaZe Holdings Inc. (Nasdaq: FAZE) a lifestyle and media platform focused on gaming and youth culture, effective no later than October 3. Pachler has over 25 years of financial management experience. Pachler joins FaZe Clan from Critical Content, an independent television studio in Los Angeles, where he served as general manager and chief financial officer. Prior to Critical Content, Pachler was executive vice president and chief financial officer of Playboy Enterprises, a media and brand licensing company. Pachler previously spent 13 years in various expanding roles at Sony Pictures Entertainment, where he last served as Chief Financial Officer and Senior Vice President of Strategy and Operations in Sony’s international TV business.

Understood

“Inflation figures may not accurately reflect a country’s economic mood, as these figures offer an incomplete picture of a country’s economic health. Consumer sentiment, on the other hand, reflects our attitudes “with respect to the current state of the economy and our expectations for its trajectory. And clearly, consumer confidence is at an all-time low and its decline has been longer than past lows.”

—Christos A. Makridis, a professor, entrepreneur, and advisor who is a research associate at the Manhattan Institute, explained in a Fortune opinion piece that research shows consumer sentiment matters more than inflation and unemployment figures.

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