US fines Canoo $1.5 million over revenue projection reporting

[August 05, 2023]  By Jody Godoy

(Reuters) - The U.S. Securities and Exchange Commission fined electric vehicle company Canoo Inc $1.5 million on Friday for what the regulator alleges were reporting failures related to hundreds of millions of dollars of unreasonable revenue projections.

The SEC said Canoo, former CEO Ulrich Kranz and Paul Balciunas, its former chief financial officer, misled investors about the company's financial prospects before it went public in a merger with a special purpose acquisition company in December 2020.

In the run-up to the deal, Canoo had projected revenue of $120 million in 2021 and $250 million in 2022 based on deals to provide engineering services to other companies.

In March 2021, the carmaker's stock tumbled 21% after it announced it would not achieve the anticipated revenue, the SEC said in court papers.

Canoo did not admit to wrongdoing in the settlement. The company said in May that it reached a tentative deal with the SEC to end the investigation, which began in April 2021.
 

The SEC also settled with former CEO Kranz and former CFO Balciunas. Kranz agreed to be barred from serving as an officer or director of public companies for three years and to pay a $125,000 fine. Balciunas agreed to a two-year bar, to pay a $50,000 fine and return $7,500 in profits.

The SEC said Kranz and Balciunas knew before the merger that the projects were unlikely to generate revenue.

The regulator also alleged that Kranz failed to disclose more than $900,000 in compensation he received from two Canoo investors in October 2020 to stay with the company.

Daniel Wachtell, an attorney for Balciunas, said his client was pleased to have the matter resolved. An attorney for Kranz declined to comment.

A general view shows a Canoo LV (Lifestyle Vehicle) electric vehicle outside a manufacturing site in Livonia, Michigan, U.S. November 29, 2022. REUTERS/Rebecca Cook/File Photo

Canoo said in May it had tentatively agreed to pay a $1.5 million penalty to settle with the SEC.

A spokesperson for the company did not immediately reply to a request for comment on Friday.

The Texas-based company warned investors in May that it might not be able to meet its financial obligations, saying it had access to $600 million in funding but added it had "substantial doubt" about continuing as a going concern.

The carmaker is scheduled to report its second quarter results on Aug. 14.

Canoo's stock peaked at $20.28 per share around its public debut in December 2020, but has declined, trading below $1 per share since February.

The SPAC boom of 2020 and 2021 brought the likes of DraftKings Inc (DKNG.O) and electric truck maker Nikola (NKLA.O) public, but drew scrutiny from watchdogs and the SEC over what they described as less stringent due diligence.

The SEC pursued a number of SPAC-related enforcement investigations and also sought to overhaul rules for the blank-check companies to boost disclosures and increase accountability.

(Reporting by Jody Godoy in New York; editing by Jonathan Oatis, Nick Macfie, Deepa Babington and David Gregorio)

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