Canoo stock price has imploded, costing long-term investors millions of dollars over time. GOEV shares plunged by over 24% on Friday after it unveiled another round of furloughs as odds of survival remained slim. It has crashed by over 97% this year, bringing its market cap to over $13 million.
GOEV bankruptcy risks remain
Canoo is a Tesla wannabe that aims to be a big player in the electric vehicle industry. Over time, the company has engineered several vehicles and received orders worth over $3 billion from organizations like NASA and Walmart.
Canoo’s main difference from Tesla is that its vehicles target businesses, especially those that require last mile delivery solutions. This is a big market as these companies implement transition strategies from internal combustion engines (ICE).
The company has made a lot of progress in the past few months. For one, it received a special economic zone from Oklahoma state and acquired some manufacturing equipment from Arrival, another Tesla wannabe that collapsed.
The challenge, however, is that Canoo has been a cash incinerator in the past few years. In this, it has lost millions of dollars during the research and development as many other EV companies have done in the past.
There are signs that the company’s end times are nearing as it continued to furlough more staff. In an SEC filing, the company said that it would furlough another ten employees, bringing the total to 50 workers. It is doing that to save its already low finances.
There are significant risks that Canoo will ultimately file for bankruptcy or sell its business to another manufacturer. Other Tesla wannabes like Fisker Automotive and Lordstown Motors have already done that.
Read more: Canoo stock analysis: the end is nearing for GOEV
Canoo balance sheet problems
The main reason why Canoo may file for bankruptcy is that it does not have adequate cash on its balance sheet. The most recent results showed that it had just $1.5 million in cash and equivalents. It also had about $3.9 million in restricted cash and $9.9 million in inventories.
These are significantly low numbers for a company that is burning substantial sums of money. Its last quarter results showed that its revenue was just $891,000, while its loss from operations rose to over $59.19 million. Its diluted loss per share was about 31 cents.
Its nine-month loss was over $112 million, an improvement from the $273 million it lost in the same period last year.
Most EV companies, including companies like Rivian and Lucid are incinerating cash. The difference between them and Canoo is that they have access to capital. Rivian raised cash from Volkswagen, while Lucid is backed by Saudi Arabia, a country with “unlimited” sums of money.
Also, these companies have equity to sell. In Canoo’s case, its equity value has crashed to just $13 million, meaning that it has limited room to raise cash. Canoo has already diluted its shareholders as the number of outstanding shares has risen from 1.3 million in 2019 to 87 million today.
Canoo stock price analysis
GOEV chart by TradingView
The weekly chart shows that the GOEV stock price has been in a strong bearish trend in the past few months. It has now collapsed to a record low, a trend that may continue in the coming months.
The stock has dropped below the important support level at $1.20, its lowest level in March last year. It has also moved below the 50-week and 100-week moving averages, while the Relative Strength Index (RSI) and the MACD indicators have pointed downwards.
Therefore, the stock will likely continue falling, with the next point to watch being at $0.10. The risk, however, is that the stock could go through a short squeeze because of its high short interest.
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