Canoo Inc. (NASDAQ:GOEV), a company specializing in motor vehicle parts and accessories, announced today that it has entered into a Pre-Paid Advance Agreement with YA II PN, Ltd., a Cayman Islands exempt limited partnership, known as Yorkville. According to the agreement, which was effective today, Yorkville will provide Canoo with an advance of $15 million.
The advance from Yorkville will be balanced against the issuance of Canoo’s common stock at an initial price of $2.30 per share. The agreement stipulates that the purchase price will be adjusted on the 60th and 120th days following the effective date, based on the average of the daily volume-weighted average prices for the ten trading days immediately preceding those dates, subject to certain conditions outlined in the agreement.
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. The number of common shares issued under this agreement is capped at 19.99% of Canoo’s outstanding common stock as of the effective date, unless shareholder approval is obtained for a higher amount.
The agreement also includes an annual interest rate of 5% on the outstanding balance of the advance, which may increase to 15% in the event of default. Canoo has committed to registering the resale of the shares issued to Yorkville with the Securities and Exchange Commission.
The issuance of common stock to Yorkville is exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as Yorkville is an accredited investor and the shares are being acquired for investment purposes.
This financial move is part of Canoo's broader strategy to secure funding for its operations. The company's actions today are based on information contained in a press release statement and are subject to the terms and conditions set forth in the Pre-Paid Advance Agreement.
In other recent news, Canoo Inc. reported progress in its first quarter 2024 earnings call, despite facing 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 has seen 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.
In terms of capital raising, Canoo has secured funds from Yorkville Advisors, equity market transactions, and strategic partnerships. The company has also been purchasing manufacturing assets at a discount and is working on securing multiyear agreements to enhance supply chain efficiency. Notably, Canoo is not dependent on Chinese batteries, sourcing instead from allied nations.
InvestingPro Insights
As Canoo Inc. (NASDAQ:GOEV) navigates its financial strategy with the new Pre-Paid Advance Agreement, InvestingPro data indicates a market capitalization of $149.48 million USD, suggesting a relatively small player in the motor vehicle parts and accessories industry. The company's financial health shows significant challenges, with a negative P/E ratio of -0.23 and an even lower adjusted P/E ratio for the last twelve months as of Q1 2024 at -0.44. This reflects the broader concerns highlighted by InvestingPro Tips, particularly regarding Canoo's significant debt burden and difficulties in maintaining profitability.
InvestingPro Tips suggest Canoo may struggle to make interest payments on its debt, which is crucial to consider given the new agreement's 5% interest rate on the advance from Yorkville. Additionally, the company's gross profit margin stands at a concerning -167.95% for the same period, underscoring the challenges Canoo faces in achieving positive financial results. Despite analysts anticipating sales growth in the current year, they do not expect the company to be profitable this year. These insights are essential for investors considering the impact of the recent funding strategy and the company's future prospects.
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