Canoo CEO Approved to Buy Bankrupt EV Startup's Assets

Canoo Asset Sale Approved to CEO

The bankruptcy court judge presiding over the case has authorized the sale of assets belonging to the electric vehicle startup, Canoo, to its Chief Executive Officer. Following a review of several limited objections, Judge Brendan Shannon determined during a Wednesday hearing that the sales process was conducted fairly. He also noted that Anthony Aquila, Canoo’s CEO, was the sole bidder.

Asset Acquisition Details

Judge Shannon’s ruling now allows Aquila to acquire the majority of Canoo’s assets for approximately $4 million in cash. According to legal representatives for the CEO, Aquila intends to continue providing services to existing clients, including organizations like NASA and the Department of Defense, who previously purchased Canoo vehicles.

Wave of EV Startup Bankruptcies

Canoo represents the most recent in a series of EV startups to declare bankruptcy. Other companies facing similar financial difficulties include Fisker, Lordstown Motors, and Nikola.

CEOs Seeking Asset Purchases

The attempt by a CEO to purchase company assets isn’t unique to Canoo. Steve Burns, founder and former CEO of Lordstown Motors, successfully acquired most of his company’s assets during its bankruptcy proceedings. Similarly, Trevor Milton, the newly pardoned founder and former CEO of Nikola, is currently pursuing the acquisition of his startup’s assets.

Initial Interest in Canoo’s Assets

While Aquila ultimately prevailed, other parties initially expressed interest in Canoo’s assets.

Mark Felger, legal counsel for Canoo, stated during the hearing that up to eight parties signed non-disclosure agreements and evaluated the available assets. However, only a small number progressed to the point of considering a formal bid.

Concerns Regarding Foreign Ownership

One potential bidding group raised concerns with the Committee on Foreign Investment in the United States due to its unspecified foreign ownership structure, according to the bankruptcy trustee.

Harbinger’s Objection and Ongoing Dispute

Harbinger, an electric truck startup, was among the parties that nearly submitted a bid. They recently objected to the sale, alleging that Canoo was concealing assets from prospective buyers. Aquila’s legal team countered that Harbinger’s objection lacked both merit and factual basis.

Origins of Harbinger and Trade Secret Lawsuit

Harbinger was founded by individuals who previously worked at Canoo, splitting off to form the new company in 2021. Canoo subsequently filed a lawsuit in late 2022, accusing these founders of misappropriating trade secrets – a case that remains ongoing.

Lawsuit’s Impact on Asset Valuation

The outcome of the trade secret lawsuit became a central point in the asset sale proceedings. The trustee believes a favorable ruling for Canoo could yield substantial financial recovery and potentially prevent Harbinger from utilizing the allegedly stolen trade secrets.

Dispute Over Alleged Trade Secrets

John Morris, representing Harbinger, emphasized during the hearing that, despite two years of litigation, the specific trade secrets purportedly misappropriated have not been identified. Canoo has not disclosed, even under seal, what information it alleges Harbinger stole.

Harbinger argued that the lack of clarity regarding the trade secrets hindered the trustee and appraisal firm from accurately valuing the estate, leaving potential bidders uninformed.

Concerns Regarding Settlement Control

Morris also highlighted a clause in the sale agreement granting Aquila final approval over any potential settlement in the lawsuit with Canoo.

He contended that the trustee had breached their fiduciary duty by granting a potentially conflicted Aquila ultimate control over settlement negotiations. Judge Shannon ultimately disagreed with this assessment.

Judge Shannon’s Rationale

Shannon cited the trustee’s testimony detailing weeks of negotiations with Aquila, involving multiple offers and counteroffers, as evidence of a properly considered sale. He affirmed that Aquila’s relationship with the company had been appropriately disclosed.

“The trustee has run a process that has resulted in a significant offer,” and the sale has been “proceeding in good faith,” Shannon stated.

Resolution of Remaining Objections

Other objections to the sale primarily originated from companies with outstanding balances with Canoo or those still possessing Canoo equipment. Felger informed the court that most, if not all, of these issues are currently being resolved.

This story has been updated to reflect the judge’s final order and a response from WHS Energy Solutions, the entity controlled by Aquila.