Electric Startup Canoo Sued For Allegedly Missing $10,600 Payment

Electric vehicle hopeful Canoo is getting sued by the company it hired for media and strategic communications. What’s wild is that the amount it’s going to court over is just $10,600.

Sure, it’s a lot of money if you’re most of us, but for a company that has burned through hundreds of millions of dollars, it seems like a drop in the bucket. In this case, it’s starting to feel like it could be the straw that’s poised to break this camel’s back.

The lawsuit first reported by OKCFox shows that Saxum Strategic Communications sued Canoo in Oklahoma court on August 7. It alleges that Canoo failed to make two payments of $5,000 each. It’s asking the court to grant it a $10,600 judgment along with “reasonable costs and attorney’s fees.”

According to the suit, Saxum and Canoo entered into their contract on August 10, 2023. “On or about October of 2023, Canoo defaulted on its contractual obligations with Saxum by failing to pay the required monthly fee when due.”

It’s not totally clear in the lawsuit filing, but that makes it sound as if Canoo hired Saxum and then never paid them a dime. If true, it would mean that Saxum did about two months of work, realized that Canoo wasn’t paying the bill, and subsequently terminated the contract.

Let’s add just a bit more perspective when it comes to the amount of money we’re talking about. Canoo brought in $886,000 of revenue in 2023. It spent $1.7 million, or more than double its revenue, on the CEO’s private jet expenses.

The Other Lawsuit

But wait! There’s more! If struggling to pay a $10,600 bill sounds bad just keep in mind that Canoo is also facing a lawsuit alleging that it owes $573,142.82.

That case involves Air Capital Equipment, a compressed air system company. The plaintiff says that it allowed Canoo to have an open account over materials it would supply to Canoo. The EV startup allegedly racked up that bill but Canoo says it doesn’t owe Air Captial that cash.

Instead, it asked the court to allow it to go into an arbitration hearing. Whether or not that happens is up to the judge, but Air Captial is fighting it. The two parties have a hearing on August 30th about the situation.

The Bigger Picture

Canoo has scored some large-sounding contracts like ones with NASA and the USPS. By all accounts it’s delivered just nine vehicles in total between the two deals though.

That includes a trio to NASA and six more to USPS. Seeing as these aren’t $3.8 million bucks a piece, it seems hard to make a profit at that sort of production rate.

In the first quarter, it posted a loss considerably larger than analysts expected. According to Reuters, it posted a $110.7 million loss when the market expected it to lose just $55.2 million.

In May, it told the Securities and Exchange Commission something less than awesome. “We believe substantial doubt exists about the Company’s ability to continue as a going concern for twelve months from the date of issuance of our financial statements,” it said. You see this in quarterly financial statements from startups that are potentially on the edge.

Since the start of the year, its stock price has dropped almost 70 percent. Despite all of this, the company is still alive and set to publish its second-quarter financial results on August 14. At that point, we’ll learn a lot more about just how healthy this small EV start-up that has reportedly built approximately 22 vehicles in roughly seven years is doing.

Perhaps the wildest part in all of this is that Canoo has several orders for many thousand vehicles. Despite that, it seemingly hasn’t been able to ramp up production beyond the few cars it’s already made. If it somehow manages to work its way out of the hole it’s evidently in, it’ll be a legendary recovery. It’ll need to be able to pay $10,600 bills to do it, though.