I have some worthless call combos on Canoo (GOEV) that I've officially set on fire this morning. Yesterday's announcement that the CFO was leaving created trepidation on my part. While I still liked the company, the resulting selloff didn't have me buying. Essentially, I was left with some lottery tickets for an earnings call that might breathe life back into the name.
The earnings call did not have the bullish impact many GOEV holders hoped. In fact, it did quite the opposite. The CEO wasn't on the call. Instead, it was fielded by the Executive Chairman. So, we have the CFO gone, the VP of Corp Strategy gone, and the CEO missing in action. Then, we find out Canoo plans a pivot away from engineering services, killing the partnerships with Hyundai and Kia. Additionally, it pushed back from the subscription model for the lifestyle vehicle.
In short, it removed two of my biggest draws to the name. The partnership with big name autos provided validity. The engineering services provided a diversified revenue model for the company and revenue that could be realized immediately. The good news is they have $700 million in cash as of December 31, 2020. Net cash used in operations for the year was only $107 million, so they have a long runway, but net cash used was $41.9 million in quarter four so bulls will want to keep an eye on that. Quarterly burn in the $40 million-$50 million range certainly shorten the timeline. If they can get their pickup truck out in 2023, they should be okay, but the company clearly is doing an overhaul of its execute suite. That's a risk with a SPAC coming public. Sponsors and funders may have a different vision than existing management. I don't like to see a team replaced so quickly.
I expressed concerns yesterday on the CFO departure. I'm doubling down on those today. The stock has been hammered, currently trading lower by 24%. The technical picture is absolutely destroyed. I won't be surprised to see a bounce in the near-term, but this is a great example that when the fundamental story changes in a company, you should re-examine your thesis.
Admittedly, GOEV was one of the EV names I favored, however, the story changed. As I re-examine my original thesis, much of what I liked is now gone. The stock may be a great trading stock for the next few weeks or a bounce candidate, but my original bullish thesis is gone. What I see in its place is not something that leads me to a bullish conclusion. With the recent developments, my mind is changed for a view over the next six to 15 months as the company needs to prove itself on the pivot with a new management team. In the short term, it will remain on my screens as a stock to potentially scalp.