Shares of Canoo (NASDAQ:GOV) are trending and up nearly 10% today following news that the electric vehicle (EV) startup has secured an exclusive distribution deal for its cars in Saudi Arabia.
Canoo, based in Torrance, California, received a financial lifeline from the Olayan Group, which agreed to distribute its electric vehicles in Saudi Arabia. In May 2022, Canoo warned that it was having difficulty raising funds and was at risk of running out of cash and going out of business.
Prior to today, GOEV stock was down 77% in the past 12 months to trade at $1.27 per share, putting it deep in penny stock territory.
What happened with GOEV shares
In a press release, Canoo said a division of Olayan will position its electric vehicles in the luxury market in Saudi Arabia. The agreement covers the sale, distribution and maintenance of Canoo vehicles. Financial terms of the deal were not disclosed. However, the two companies also plan to launch a digital vehicle ecosystem for service maintenance, local assembly and manufacturing in Saudi Arabia.
“The Olayan Group is a global leader with decades of experience in channel partnerships with some of the world’s biggest brands and is a proven partner in supporting electric vehicles in the region,” said Tony Aquila, President and CEO of Canoo.
why is it important
Canoo has struggled to ramp up production over the past year and warned of dwindling funds. Founded in 2017 by a former executive of BMW (OTCMKTS:BMWYY), Canoo launched its first electric vehicle in 2019, an electric van called Canoo Lifestyle Vehicle. The company is also developing an electric pickup truck slated for release later this year.
Canoo has already received funding from both Hyundai Motors (OTC:HYMTF) and Kia engines. However, Canoo has struggled to attract funding over the past year as markets deteriorated. The company got a break in July 2022 when walmart (NYSE:WMT) has agreed to purchase 4,500 of its Lifestyle vehicles, with an option to purchase up to 10,000 in the future.
Now, the distribution agreement in Saudi Arabia offers Canoo a new market for its electric vehicles. Entering the rich market could boost Canoo’s future earnings.
What’s next for GOEV shares
Investors are reacting positively to news of Canoo’s deal with Saudi Arabia, driving GOEV shares up sharply today. The distribution agreement is certainly a positive development. However, investors should keep in mind that Canoo still has a long way to go to establish itself as a serious player in the highly competitive and increasingly fragmented electric vehicle space.
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As of the date of publication, Joel Baglole had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.