Emerging Tech Series: Canoo plans to go public later this year

Joining the wave of companies chasing Tesla’s success, Electric-vehicle startup Canoo announced yesterday that it will go public at an estimated $2.4 billion valuation later this year. Like some other new entrants, Canoo will use an unusual listing method that avoids a traditional IPO.

 

About Canoo

Based out of Torrance, California, electric vehicle startup Canoo (initially Evelozcity) was founded just two years ago after executives Stefan Krause and Ulrich Kranz fled the chaos at Chinese-owned EV startup Faraday Future.

The company rebranded as Canoo in spring 2019 and debuted its first vehicle last September.

Its executive team includes veterans from BMW and Canoo announced earlier this year that it would partner with Hyundai to produce its vehicles.

With 300 employees, including many who have worked at other EV and tech firms, Canoo believes it has the talent and vision to grow its EV business.
Canoo said it was able to raise $300 million in private investment in public equity, or PIPE, including investments from funds and accounts managed by BlackRock.

That money has helped the company build 32 prototypes, with 13 currently on the road being tested and validated.

By going public, Canoo said it will have about $600 million that will go toward the production and launch of electric vehicles built off of its unique technology.
Canoo has been developing a fleet of electric, 7-passenger urban people carriers that will be offered to customers via a subscription only.

To maximize the interior volume, the Canoo people mover uses a very slim skateboard platform that offers enough cabin space to accommodate up to seven passengers in a relatively small footprint. The compact dimensions, large cargo volume, and overall utility make the Canoo the ideal city commuter vehicle, according to the company.

 

canoo space

 



The skateboard architecture

The heart of Canoo’s first vehicle, which looks more like a microbus than a traditional electric SUV, is the “skateboard” architecture that houses the batteries and the electric drivetrain in a flat chassis underneath the vehicle’s cabin. This unique architecture strategy allows bodies tailored to a variety of applications—which Canoo refers to as “top hats”—to be built on top of a single type of frame. Canoo says this modular approach will allow the company to serve a variety of market segments at reduced cost.

That architecture caught Hyundai’s interest earlier this year. The Korean automaker announced in February plans to jointly develop an electric vehicle platform with Canoo, based on the startup’s proprietary skateboard design. The platform will be used for future Hyundai and Kia electric vehicles as well as the automaker group’s so-called “purpose-built vehicles.” The PBV, which Hyundai showcased at CES 2020, is a pod-like vehicle that the company says can be used for various functions in transit, such as a restaurant or clinic.

canoo shared


A subscription model

Canoo is also notable for its planned subscription model, which it describes as month-to-month and “commitment-free,” while including maintenance, warranty, and charging.

The idea behind the subscription-only model is to make these electric people carriers available to members only when needed. In turn, Canoo will take care of all of the maintenance and upkeep of the electric shuttles.

A similar subscription model is planned by Nikola, but Nikola is focused largely on commercial electric freight trucks and is expected to require more commitment from customers.

The option of renting a consumer vehicle on a monthly basis would be fairly novel for consumers, while leaning into a broader trend toward recurring subscription revenue that has been embraced by entrepreneurs and investors. However, the no-commitment model would also seem to represent special risks if Canoo’s products disappoint or consumers prove flighty.




First vehicle in 2022

Canoo’s first vehicle, by contrast, will be a consumer-focused “lifestyle vehicle” called the Canoo, expected for release in 2022 (the first release was initially planned for 2021). The vehicle is very unusual, essentially a smoothed box that takes up the entire length of the chassis. Canoo has said this is intended to leverage the future potential of autonomous driving, and some of Canoo’s concept art shows the vehicle converted into something akin to a rolling lounge—with no driver.

Canoo says its second vehicle will be an urban commercial delivery vehicle, coming in 2023.

Canoo isn’t just focused on products for consumers. It also aims to offer business-to-business (B2B) vehicle configurations as well. All of Canoo’s EVs will share the same skateboard and use different cabins or “top hats” that can be paired on top to create unique vehicles, the company said. The company is aiming to produce its first B2B vehicle designed for delivery in 2023. This B2B vehicle will be designed to operate in dense urban environments and focus on last-mile delivery.



Going public through a Special Purpose Acquisition Company (SPAC)

Canoo will go public using an unusual but increasingly popular method. Instead of an initial public offering of new Canoo shares, the car company will be acquired by a so-called Special Purpose Acquisition Company (SPAC), Hennessy Capital Acquisition Corp IV, which has raised funds for the purpose. The merged company will be known as Canoo Inc. and trade on the Nasdaq stock market.

This is the fourth time this summer that an electric vehicle company has skipped the traditional IPO path and instead taken the company public through a merger agreement with a SPAC, also known as blank check companies. Nikola Corp., Fisker Inc. and Lordstown Motors have also gone public — or announced the agreement to — via a SPAC.

In a nutshell, a SPAC listing is faster than a traditional IPO, and the highly capital-intensive electric-vehicle market in particular has entered a phase where speed to market appears to be of the essence.

Once the transaction closes, the combined operating company will be named Canoo Inc. and will continue to be listed on the Nasdaq Stock Market under the ticker symbol “CNOO.”

The targeted $2.4 billion Market Cap compares with Tesla’s $ billion Market cap and Nikola’s $16.2 billion. Lordstown is targeting $1.6 billion and Fisker $2.9 billion.

 

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