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Walmart’s deal with EV startup Canoo comes with strings that includes not selling to Amazon

July 13, 2022, 2:32 PM UTC
Canoo's electric vehicle. As part of Canoo's agreement with Walmart, they cannot enter into an agreement with Amazon.
Allen J. Schaben—Los Angeles Times/Getty Images

Walmart Inc.’s deal backing an electric-vehicle startup has some strings, including a provision preventing sales to rival Amazon.

The retail giant’s agreement to purchase as many as 10,000 battery-powered vans from Canoo Inc. provides a lifeline for the fledging auto manufacturer, and Canoo shares surged more than 50% on the news Tuesday. The caveat blocking sales to Amazon was disclosed in a securities filing on Wednesday.

The language says that for the duration of the pact, Canoo “will not enter into any agreement for any services involving the design, manufacture, consult, advice, lease, or sale of EVs to, or issue any equity, equity-linked or debt securities of any type, or enter into any agreement for the purpose of transferring control of the Company to, Amazon.com, Inc., its subsidiaries, or affiliates.” The document also indicated that Walmart’s purchase order is non-binding.

Amazon already has an agreement with another EV startup, Rivian Automotive Inc., to buy as many as 100,000 electric vans that gives it priority over all other potential customers. In striking a similar deal with Canoo, albeit for a fraction of the volumes, Walmart is betting a competing technology wins out in the emerging business for battery-powered delivery fleets. It has also placed an order for EVs with established automaker General Motors Co.

Like Amazon’s equity investment in Rivian for a nearly 18% stake, Walmart also has an option to take a position in Canoo. The startup has granted Walmart a warrant to buy up to 61.2 million shares over a 10-year period at an exercise price of $2.15 a share—and vesting it immediately with 15.3 million common shares, the filing said.

Canoo shares pared an early drop of as much as 3.3% to trade down 0.6% to $3.61 as of 9:45 a.m. in New York. The stock is down about 53% this year. 

The Walmart project begins with an order for 4,500 vans, with an option for up to 10,000. Canoo recently moved its headquarters to Walmart’s hometown of Bentonville, Arkansas, and had warned in May of substantial doubt about its ability to continue as a going concern.

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