Canoo Inc. strikes $100M equity deal with Yorkville

Canoo Inc. (NASDAQ:GOEV), a company specializing in motor vehicle parts and accessories, has entered into a significant financial agreement with investment firm YA II PN, Ltd., also known as Yorkville.

The deal, effective as of Friday, July 19, 2024, allows Canoo to request up to $100 million in prepaid advances over the next 24 months, with an initial advance of $15 million already requested upon signing.

This strategic move provides Canoo with immediate access to capital, enhancing its financial flexibility. The initial advance comes with a commitment fee and a discounted purchase price, resulting in net proceeds of approximately $14.1 million for the company.

The agreement stipulates that the advances will be offset by the issuance of Canoo's common stock to Yorkville at a set purchase price, initially pegged at $2.70 per share.

The purchase price for subsequent advances will be determined by the lower of 120% of the daily volume weighted average price (VWAP) of Canoo's common stock on the trading day before the advance is disbursed or a variable price based on market performance, with a floor price of $1.00 per share.

The agreement also includes a 5% annual interest rate on outstanding balances, which may increase to 15% in the event of default.

In conjunction with the initial advance, Canoo has issued Yorkville a warrant to purchase approximately 2.7 million shares of common stock at an exercise price of $2.70 per share. These warrants will become exercisable starting January 19, 2025, and will expire on July 19, 2029.

The issuance of the common stock and warrants under this Prepaid Advance Agreement is subject to certain conditions, including the maintenance of a shelf registration statement and limitations on the total number of shares issued.

The deal ensures that the issuance of shares under the agreement does not exceed 19.99% of Canoo's outstanding common stock as of June 13, 2024, unless shareholder approval is obtained for a higher issuance cap.

Canoo's use of the proceeds from the sale of common stock is expected to align with the purposes disclosed in the prospectus supplement filed with the U.S. Securities and Exchange Commission. Additionally, the company has agreed not to engage in any variable rate transactions outside the terms of the agreement.

This financial arrangement is based on a press release statement and is intended to provide Canoo with additional resources to pursue its business objectives. The transaction with Yorkville is exempt from registration under Section 4(a)(2) of the Securities Act, as Yorkville is an accredited investor acquiring the securities for investment purposes.

In other recent news, Canoo Inc. has made significant strides in its operations. The company has entered an agreement with Go2 Delivery for the purchase of five electric Lifestyle Delivery Vehicles, with an option for Go2 Delivery to acquire up to 85 additional vans. This move aligns with Go2 Delivery's commitment to carbon-free logistics, particularly in Virginia and the Chesapeake Bay area.

Simultaneously, Canoo secured an advance of $15 million from Yorkville, a Cayman Islands exempt limited partnership. The agreement stipulates that the advance will be balanced against the issuance of Canoo’s common stock at an initial price of $2.30 per share. After accounting for the commitment fee and the purchase price discount, the net proceeds from the advance are expected to be approximately $14.1 million.

In the first quarter of 2024, Canoo reported progress in its operations despite supply chain challenges. The company highlighted deliveries made to USPS in Atlanta and Red Sea Global in Saudi Arabia, with plans to increase manufacturing to a run rate of 20,000 vehicles by the end of the year.

Financially, Canoo saw reductions in R&D and SG&A expenses, improvements in adjusted EBITDA and adjusted net loss per share, and concluded the quarter with $18.2 million in cash and equivalents.

InvestingPro Insights

Canoo Inc.'s recent financial agreement with Yorkville is a key step towards strengthening its capital structure amidst challenging market conditions. Real-time data from InvestingPro indicates a market capitalization of $163.76 million, suggesting a relatively modest size within the industry. Despite a negative P/E ratio of -0.24, which reflects the company's current lack of profitability, analysts tracked by InvestingPro expect sales growth in the current year which could be a positive sign for the company's future revenue trajectory.

InvestingPro Tips highlight that Canoo operates with a significant debt burden and may have trouble making interest payments, which underscores the importance of the liquidity provided by this deal. Additionally, the company's stock has experienced high volatility and a notable decline over the last year, with a 1 Year Price Total Return of -84.48%. This volatility is reflected in the terms of the agreement with Yorkville, which includes a variable purchase price mechanism for future stock issuances.

For investors considering Canoo's future prospects, InvestingPro offers additional insights and tips. There are 19 more InvestingPro Tips available that could help investors understand the risks and opportunities associated with Canoo's stock. To explore these tips and gain a deeper analysis, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.

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