GOEV stock: Canoo faces a mountain of existential risks in 2024

Canoo (NASDAQ: GOEV) stock price has had another difficult start to the year. After crashing by over 75% in 2023, the shares have tumbled by 7% in 2024 and are trading at an all-time low. This retreat has brought its market cap to $183 million while its short interest has risen to 18.75%.

GOEV stock price chart

Canoo faces loads of challenges

Canoo and other Tesla wannabes have had a rough time as the industry battles numerous fights at the same time. There are clear signs that EV demand is falling in most countries. A report by the Society of Motor Manufacturers and Traders (SMMT) said that EVs accounted for 16.5% of total vehicles in the UK down from 16.6% inn the previous year.

There are also concerns about the charging infrastructure in most countries. While the number of EV charging stations has risen in the past few years, outages have jumped in equal measure. This is a challenge that many companies like Blink Charging, ChargePoint, and EvGo are struggling to handle.

Further, the cost of EVs is still higher than traditional vehicles. As Hertz has learnt, the cost of maintenance of EVs is also not all that cheap. Additionally, higher interest rates and inflation has made things difficult in the past few months. 

The other big challenge for Canoo is that its balance sheet is quite strained. A recent report by WSJ noted that the company had just $12 million in cash and short-term investments at the end of its quarter. Its estimated days of cash left stood at just 18. In a statement, the company said that it had raised $45 million with a convertible preferred stock sale.

The challenge for Canoo is that it is still burning substantial sums of money every month. As such, while the $45 million cash is a good start, it will also not go a long way. For example, the company’s net loss stood at $48 million in the last quarter, an improvement from $109 million in the same quarter in 2022.

Looking at its liabilities, we see that the company is not doing well. Its total liabilities stand at $368 million. In this, total current liabilities stand at $187 million. Current liabilities are important because they refer to financial obligations that are due within one year.

Many companies balance the current liabilities with current assets. An ideal situation is where the current assets are higher than current liabilities. In this case, the company has current assets of just $32 million.

Will Canoo survive 2024?

Therefore, the question is whether Canoo will survive this year or whether it will file for bankruptcy. I believe that the company faces a tough year as its existing liquidity dries up. And don’t take my word for it. In the last 10Q report, the management said the following:

In this case, Canoo has limited options to raise money. It can do an ATM capital raising, which will continue to dilute existing investors. However, with a market cap of $180 million, such a dilutive equity raise can only go too far.

The other option is where it uses debt financing. A likely path is where it borrows funds against its future deliveries since it already has orders worth $3 billion from the likes of Walmart and Zeeba. Such a deal, however, will likely lead to future cash flow challenges. 

Therefore, I believe that Canoo faces a bleak future in 2024 as its existential risks remain. The only thing that its management can hope for is a short squeeze. This is a highly probable situation since the company sports a short interest of 18.75%.