Walmart Inc. has entered into a deal with an Electric Vehicle startup with certain conditions, including a provision to prevent sales to rival Amazon.
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Amazon’s agreement with Canoo Inc. to purchase 10,000 battery-operated vans offers a lifeline to the fledgling EV maker. Walmart could also become a one-fifth owner in the future as per a warrant issued to the retail giant by Canoo as part of the deal. The shares of Canoo rocketed more than 50% as news of the deal broke out Tuesday.
According to Bloomberg News, the warrant for ownership and the caveat blocking sales to Amazon details were revealed in the securities filing by Canoo on Wednesday.
The agreement terms say that Canoo will not enter into another deal with Amazon.com Inc. for any services that include designing, manufacturing, consulting, leasing, advisory, or selling electric vehicles during the agreement. Its language also mentions that no equity, equity-linked, or debt securities will be issued to Amazon.com for transferring control of Canoo to Amazon .com or its subsidiaries or affiliates. The agreement also says that Walmart’s purchase order for the Electric vehicles from Canoo is non-binding.
Amazon.com also has an agreement with another Electric Vehicle Startup, Rivian Automotive Inc., to purchase as many as 100,000 EVs, giving them priority over other potential customers of Rivian. By striking a similar deal with Canoo Inc., though the volume is a fraction compared to Amazon’s Rivian deal, Walmart is betting on technology for delivery fleets powered by batteries for an emerging business. Amazon has also placed an EV order with giant automaker General Motors Co.
According to the filing, Walmart has an option to exercise an equity stake in Canoo, similar to Amazon’s investment in Rivian Automotive for a nearly 18% equity stake. The EV startup has approved a warrant where Walmart can exercise buy options for up to 61.2 million shares over the next 10-year period at a strike price of $2.15 and immediately vest it with the common shares of 15.3 million.
The shares will vest quarterly and in proportion to Walmart’s payments for the vehicles to Canoo, subject to a maximum of $300 million. At that point, all the 61.2 million shares purchased will be exercised. After completing the exercise, Walmart will own more than 20% of Canoo Inc.
After rocketing by more than 50% on Tuesday, Canoo shares fell 6.8% Wednesday in New York to $3.39. The stock overall has declined by about 57% in 2022.
The Walmart purchase plan starts with an order of 4500 vans with an option to go up to 10,000. Canoo had warned in May about its inability to continue as a going firm. It recently moved its headquarters to Bentonville, Arkansas, the hometown of Walmart.
