Walmart's Canoo Deal Blocks Startup From Selling EVs To Amazon

The deal also includes an option for Walmart to buy approximately 20% of Canoo's common stock.

By: Dan Mihalascu

Jul 14, 2022 at 6:53am ET

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Walmart's decision to buy 4,500 electric delivery vans from Canoo may prove to be essential for the EV startup's survival, but it does come with strings attached.

According to a securities filing on July 13 seen by Automotive News, the deal includes a provision preventing Canoo from selling its electric vehicles to rival Amazon. Actually, Walmart has very specific requirements that go beyond blocking Canoo from selling its vans to Amazon. Here's the exact language used in the 8-K form.

"Under the EV Fleet Purchase Agreement, the Company [Canoo] has agreed that, for the duration of the agreement, it 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 for 4,500 Canoo electric delivery vans an the option to extend it to 10,000 is non-binding.

This provision provides an insight into the fierce competition between retail companies and how their enormous purchasing power allows them to impose such drastic conditions on their EV suppliers. Meanwhile, Amazon already has an agreement with Rivian Automotive 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 of a much lower order of magnitude, Walmart is betting that its "horse" will win in the emerging business for battery-powered delivery fleets. In another resemblance to the Amazon-Rivian deal, Walmart also has an option to take an equity investment in Canoo, whose shares jumped more than 50% the day the deal was announced.

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The EV 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, vesting it immediately with 15.3 million common shares. Should Walmart exercise the warrant, it would give it an equity of roughly 20% in Canoo. The startup's shares closed at $3.57 on July 13, compared to $2.37 on July 11, a day before the Walmart deal was announced.

Canoo isn't Walmart's only option in the electric delivery van market. Earlier this year, the retail giant also placed an order for 5,000 BrightDrop Zevo 400 and Zevo 600 vans from GM and 1,100 E-Transits from Ford.