Canoo's Partnership with Hyundai Appears to Be Over, Stock Drops

Zac Estrada

Zac Estrada is a reporter covering transportation, technology and policy. A former reporter for The Verge and Jalopnik, his work has also appeared in Automobile Magazine, Autoweek, Pacific Standard, and BLAC Detroit. A native of Southern California, he is a graduate of Northeastern University in Boston. You can find him on Twitter at @zacestrada.

Photo Courtesy of Canoo

Canoo's fortunes took a sharp turn this week after a shake up in their C-suite with their chief financial officer abruptly leaving and a partnership with Hyundai Motor Group falling apart.

On Tuesday, the Torrance-based automaker's shares plummeted as much as 25%, erasing the gains it made after its latest product was revealed earlier this month.

The news came after the company's first investor call as a public company, in which CEO Ulrich Kranz was absent and Chairman Tony Aquila announced a shift in strategy to consumer sales that suggested the company's contract with Hyundai Motor Group is no more.

The announcement took analysts on the call by surprise.

"You're obviously de-emphasizing engineering and engineering services," Roth analyst Craig Irwin told Aquila during the call. "So that seems to imply that the original SPAC model is no longer guidance going forward. Is that accurate?"

Aquila tried to assure Irwin and other analysts throughout the call that the company was on steady ground but was met with skepticism.

"To be a contract engineering house is just really not going to drive the best shareholder value," he told them.

Canoo went public last December in a SPAC agreement with Hennessy Capital Acquisition valuing the company at $2.4 billion.

In February 2020, it announced an agreement with Hyundai to develop a "skateboard-like" battery electric vehicle platform for Hyundai and Kia-branded products similar to Canoo's for its own vehicles. It positioned itself as a company that legacy brands could turn to for design and engineering work.

The deal was widely viewed as a huge boon for Canoo, which started in 2017. It would also give Hyundai a way to quickly deliver more electric cars and commercial vehicles to meet its own goals.

Both companies have also recently been connected to assist in the fruition of the long-rumored Apple Car. But talks with the Cupertino-based electronics company amounted to nothing. Hyundai Motor America and Kia Motors America are based in Orange County. A Hyundai representative was not immediately available for comment on Tuesday.

The startup automaker revealed Monday in its 2020 earnings report and investors call that Chief Financial Officer Paul Balciunas was no longer with the company. Instead, Aquila installed five new executives, including an interim CFO, chief technology officer and chief marketing officer on Monday. Kranz is "still currently the CEO of the company," he said later in the call.

"The majority of this team has worked together for more than 17 successive quarters and never missed consensus estimates," Aquila said in Monday's statement. "As Canoo became a public company and expands from engineering to commercialization, we wanted to bring in an executive team that not only had experience but had experience working together."

Aquila also said Canoo was in the process of looking at finalists for a joint venture on producing its products, but added that any deal would be dependent on state deals and any assistance from the Biden administration for electric vehicle projects.

Canoo's stock (GOEV) closed at $9.30, dow 21.2%. On March 15, it hit a high of $15.70.

Canoo's month started more optimistically as it unveiled a dramatically-styled pickup truck it plans to start producing in 2023. Shares soared on the announcement. It already announced last year its plans for a delivery van based on the same platform aimed at the commercial market.

"These are significant surprises on the call today, and that's not ideal after a SPAC IPO process," Irwin told Aquila. "I just wanted to underline that."

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