Keep shining, keep smiling, knowing you can always count on me, for good times, for bad times…said every SPAC investor during the hottest summer for SPACs ever, and then Nikola happened, and prices plummeted and….Hennessy Capital Acquisition (HCAC) shares are now waiting for something to push them up.
Will that something ever come?
Why Canoo stands no chance against the big dogs
Actually, the subtitle should be-Why Canoo (HCAC) shares will flop short term. Here are my thoughts. Canoo, with its “advanced skateboard technology” is either 10 years too early in the market for whatever they wanna do, or they will burn so much money before they even capitalize on their vehicle deliveries. Their big plan is to produce a commercial delivery B2B vehicle with expected availability in 2023.
SO, that is 2 years from now, if everything goes the way it is supposed to go. Two years is 24 months. I am assuming their cash burn rate is through the roof which is probably the main reason to go IPO via reverse merger. Multiply that monthly cash burn rate with 24 and you get a really hungry company, hungry for more money. While they already raised $450 million so far, this is a car company, and running car production costs money.
If someone who reads this article knows what is an exact monthly cash burn rate for Canoo please let me know in the comment section below and I will fix the article, but I tried to find that number to no avail.
Where the company stands financially is unclear. But one thing is clear, some of the founders of Canoo tried something similar back in 2015 when they managed Faraday which was , according to The Verge, a secretive car company chasing Tesla (TSLA). Well, back then that secretive company had 400 employees and wanted to build $1B car factory.
Of course, they failed. They were too fancy to succeed.
There’s extraordinary hype here backed by real talent, but there’s no consumer-grade product on the horizonthe verge on faraday.
But the business model was the one that resembles that of Canoo. Fully autonomous vehicles sold through a subscription service. And once Faraday was almost dead in the water, the company issued a press release saying that their CFO is sacked due to “malfeasance and dereliction of duty”. CFO was Stephan Krause. Together with CFO Faraday part its way with their CTO Ulrich Kranz.
Kranz and Krause then created a new EV company by the name of Evelozcity, later re-branded to Canoo.
HCAC is Optimist vs Realist game
Regardless of which camp you belong to — the giddy optimists or the gritty realists — there’s no denying that, despite last summer’s stunning rally, EV stocks appear relatively expensive right now.
EV SPACs may have dipped, but that doesn’t mean they’ve crumbled — yet. Which is why the bottom feeders might still waiting around the corner before they jump on HCAC ship.