A southern California start-up is facing scrutiny from the Securities and Exchange Commission (SEC), TechCrunch reported on Monday in an article by Kirsten Korosec. Canoo Inc. first learned of the investigation in late April and made it publicly known through an earnings report submitted on Monday. Following news of the investigation and its first-quarter earnings, TechCrunch reported that the company’s share price fell more than 3%.
According to the news outlet, the company was launched as Evelozcity in 2017, and rebranded as Canoo in 2019. The same year it produced its first vehicle and rolled out a subscription business model, which reportedly caught investors’ attention.
More recently, TechCrunch reported, the company sustained a series of executive departures, business model modifications, and the loss of a partnership with automaker Hyundai. Korosec’s article also stated that the SEC’s investigation follows the company’s public debut and Canoo’s merger with “special purpose acquisition company” Hennessy Capital Acquisition Corp (HCAC) earlier this year.
The company’s Form10-Q quarterly report stated that the investigation will cover “HCAC’s initial public offering and merger with the Company, the Company’s operations, business model, revenues, revenue strategy, customer agreements, earnings and other related topics, along with the recent departures of certain of the Company’s officers.” The SEC’s query is a “fact finding” one, the regulatory paperwork states, noting that the commission has not concluded that the company or its professionals have committed wrongdoing.
The Form 10-Q also acknowledged that in April, Canoo was named as a defendant in two putative class action lawsuits filed in California. The shareholder lawsuits, filed on April 2 and April 9, claimed that the company misled investors about changes to its business model, precipitating a stock price collapse in late March.