Stock Prices Sink After Canoo Sells Discounted Stock For $52 Million

Canoo's shares were sharply lower in early trading on Monday after the electric vehicle startup announced that it had agreed to sell discounted shares to raise $52.5 million in order to fund its development.

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There was a 20% drop in the stock price Monday morning, when it opened at $1 per share. In the last 12 months, it has lost over 80% of its value as a result of falling prices.

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The company announced in a statement that it has entered into agreements with institutional investors to sell 50 million new shares, together with warrants that give investors the option to buy up to 50 million more shares, if they wish. Investors will be required to pay $1.05 per share, and each share comes with one warrant that can be exercised at a price of $1.30 per share.

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It was not disclosed which institutional investors were involved in the deal by Canoo.

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As of Friday, Canoo's shares closed at $1.25, which is a substantial discount from the deal price. In addition, the deal will result in significant dilution for the company's current shareholders, as it will add between 50 million and 100 million shares to the company's current outstanding share count of 356 million shares, which will mean a significant dilution for their current stakes.

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During the last quarter of 2018, Canoo announced that it had run out of cash and expected to raise cash by issuing new shares to raise funds. As of the end of the third quarter, the company had just $6.8 million in cash on hand.

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Canoo said Monday that it will use the net proceeds from the offering for "general working capital purposes." Canoo is expected to report its results for the fourth quarter later this month.