$VLTA, $GOEV, $HOOD, $PTON, $CUK
Filings from the week of May 10 - May 16.
VOLTA INC ($VLTA) reported internal control issues, which included inappropriate accounting system access privileges by its CFO. The company also reported going concern issues, C-suite resignations, and securities class action lawsuits. CANOO INC. (GOEV) also reported going concern issues but will secure funding from its CEO through a related-party transaction.
Top Red Flags
ROBINHOOD MARKETS INC ($HOOD) | 8-K | $8.4B - Robinhood announced the resignation of one of its Board of Directors, Scott Sandell, effective May 12, 2022. Mr. Sandell had been a board member since 2016.
PELOTON INTERACTIVE INC ($PTON) | 10-Q | $5.3B - Peloton recognized over $200 million of impairment charges as the company continued to report declining revenues. Furthermore, on May 6, 2022, PTON announced the resignation of one of its board members, William Lynch.
CARNIVAL PLC ($CUK) | 8-K | $16.3B - Carnival announced the resignation of its Chief Ethics and Compliance Officer, Peter C. Anderson, effective May 16, 2022.
VOLTA INC ($VLTA)
10-Q | Market Cap: $409M
Volta Inc. ($VLTA), an operator of electric vehicle charging stations, faced two securities class action lawsuits filed on March 30, 2022 and May 6, 2022. Both lawsuits allege that VLTA violated the Securities Exchange Act of 1934 by making materially false and misleading statements about its business, operations, and prospects. [1]
The lawsuits were not the only issues VLTA was dealt with.
The company reported ineffective controls for the three months ended March 31, 2022. [2] One of the primary reasons for its ineffective controls was that the CFO had inappropriate access to VLTA’s general ledger system. Also, the company did not implement appropriate segregation of duties. [3]
Not only did VLTA report internal issues, but also it reported going concern issues. VLTA concluded that there is a substantial doubt that it cannot continue as a going concern in the next twelve months. [4] The company continued to operate with a net loss and negative cash flows. [5]
The company dealt with executive resignations as well. VLTA’s CEO Scott Mercer resigned from the company on April 15, 2022 and Chris Wendel resigned as an employee and officer of the Company on March 26, 2022. [6]
- "On each of March 30, 2022 and May 6, 2022, a putative class action complaint was filed against the Company, one of the Company’s officers and one of Company's former officers (collectively, the "Defendants"), in each case, in the United States District Court for the Northern District of California. Each lawsuit alleges that Defendants violated the Securities Exchange Act of 1934, as amended, by making materially false and misleading statements regarding the Company’s business, operations and prospects."
- "Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2022 due to the material weaknesses in our internal control over financial reporting."
- "Volta did not maintain a sufficient complement of personnel to ensure appropriate segregation of duties to ensure that all journal entries and reconciliations were reviewed by an individual other than the preparer. Additionally, the Chief Financial Officer had inappropriate access rights in the general ledger system."
- "The Company concluded that there is substantial doubt that the Company cannot continue as a going concern in the next twelve months based on reasonable information available to us as of the date of this analysis. No assurances can be provided that additional funding will be available at terms acceptable to the Company, if at all."
- "For the three months ended March 31, 2022, the Company incurred a net loss of $48.1 million and had negative cash flows from operating activities of $33.8 million."
- "On March 26, 2022, Scott Mercer and Chris Wendel (the "Executives") resigned from the Company’s board of directors (the "Board"), and Mr. Wendel also resigned as an employee and officer of the Company. Mr. Mercer’s resignation as an employee and officer of the Company was effective as of April 15, 2022.
CANOO INC ($GOEV)
10-Q | Market Cap: $863M
Canoo Inc. ($GOEV), an electric vehicle manufacturer, reported that it has substantial doubt in continuing as a going concern. [1]
GOEV has not yet generated revenue, and its R&D expense in Q1 2022 is more than double of its R&D expense in Q1 2022. [2] The company stated that it expects to both incur more losses and spend more money on capital investments as it attempts to expand its business. [3]
Interestingly, the company did not report this same ‘substantial doubt’ in its 2021 annual report, which was filed only two and a half months ago.
Tony Aquila, CEO and Chairman of Canoo, stated that the company indeed has access to capital to keep going. However, he stated that they "just don’t want to access it until it's the right time at the right costs." Furthermore, he stated that reporting Canoo as having ‘substantial doubt’ as continuing as a going concern was what "[Canoo’s] accounting guy said… the conservative way to go." [4]
Nevertheless, in what seems to be a desperation move, the company sought funding through a private placement transaction on May 10, 2022 through a special purpose vehicle management by Aquila Family Ventures LLC, a company owned by Tony Aquila. In this related party transaction, the special purpose vehicle will purchase $50 million of GOEV stock at $3.65 per share. [5]
- "Based on their assessment, our management has raised concerns about our ability to continue as a going concern. As substantial doubt about our ability to continue as a going concern exists, our ability to finance our operations through the sale and issuance of debt or equity securities or through bank or other financing could be impaired. Management continues to explore raising additional capital through a combination of debt financing, other non-dilutive financing and/or equity financing to supplement the Company’s capitalization and liquidity."
- Per GOEV’s Consolidated Statement of Operations in its Q1 2022 Form 10-Q.
- "We have experienced operating losses, and we expect to continue to incur operating losses as we implement our business plans. We expect our capital expenditures to continue to be significant in the foreseeable future as we expand our business."
- https://www.fox23.com/news/canoo-ceo-addresses-substantial-doubt-statement-earnings-report/CXFVLQLDN5EHTBOPDNPTMQ2QLA/
- "On May 10, 2022, the Company entered into a subscription agreement with a special purpose vehicle managed by Aquila Family Ventures LLC, for the purchase of an aggregate $50 million of the Company’s Common Stock at a purchase price of $3.65 per share through a private placement (the "PIPE").
Hudson Labs is a web-based equity research portal. Our software extracts red flags from SEC filings that are predictive of downside risk.
Explore real-time analysis of annual and quarterly statements, 8-Ks, prospectuses, SEC comment letters and more for over 7,000 tickers. Analysis is served without human intervention. Quantamental investing is transforming the industry and Hudson Labs helps you lead the way.
We are not investment advisors, and this is not investment advice. Do your own due diligence.
