The judge overseeing the bankruptcy case of the EV startup Canoo has approved the sale of the company’s assets to its CEO. Judge Brendan Shannon, after addressing a few limited objections to the sale, stated during a hearing on Wednesday that he found the process to be fair, noting that only Canoo’s CEO, Anthony Aquila, submitted a bid.
Upon the formalization of Shannon’s decision, Aquila will be able to purchase the majority of Canoo’s assets for approximately $4 million in cash. His plans include providing services to clients such as NASA and the Department of Defense, who had previously purchased some Canoo vehicles prior to the company’s financial collapse, as per legal representatives of the CEO.
Canoo’s bankruptcy adds to a list of recent EV startup failures that include Fisker, Lordstown Motors, and Nikola. Interestingly, Canoo is not the only company in his category with a CEO attempting to buy its assets; Lordstown Motors’ founder and former CEO, Steve Burns, acquired most of his company’s assets during its bankruptcy, and Nikola’s founder and former CEO Trevor Milton is pursuing a similar course with Nikola.
Although Aquila had competition regarding Canoo’s assets, according to Mark Felger, a lawyer for Canoo, eight parties other than Aquila signed NDAs to review what was available for purchase. However, only a select few nearly bid, including one group that the bankruptcy trustee warned could trigger concerns with the U.S. Committee on Foreign Investment (CFIUS) due to unspecified foreign ownership ties.
One notable near-bidder was Harbinger, an electric truck startup that recently objected to the sale, alleging that Canoo was concealing assets from potential buyers. Harbinger’s founding team, who separated from Canoo to establish the startup in 2021, is involved in an ongoing lawsuit filed by Canoo in late 2022, accusing them of misappropriating trade secrets.
This lawsuit became a focal point in Canoo’s asset sale. The bankruptcy trustee posits that a favorable outcome for Canoo could generate significant financial gain and potentially result in an injunction preventing Harbinger from using the disputed trade secrets.
John Morris, representing Harbinger, emphasized during the hearing that, after two years in court, only Aquila is aware of which trade secrets were allegedly misappropriated, as Canoo has not specified them, even confidentially.
Harbinger’s objection also pointed to the inability of the trustee or appraisal firm to correctly value the estate due to this lack of clarity, implying that potential bidders might not have been fully informed. Additionally, Morris highlighted a controversial clause in the sale agreement giving Aquila the decisive approval over any potential settlement regarding the lawsuit with Canoo.
Morris contended that the trustee had neglected his fiduciary duty to the estate by allowing Aquila, potentially conflicted, final settlement approval. However, Shannon ultimately disagreed with this perspective.
Shannon cited the trustee’s testimony that the negotiations with Aquila lasted weeks and included numerous proposals and counterproposals as evidence of a properly considered sale. He affirmed that Aquila’s connection to the company was adequately disclosed, observing, “The trustee has run a process that has resulted in a significant offer,” and asserted that the sale proceeded with integrity.
Other objections to the sale were primarily from companies with outstanding balances with Canoo or those retaining equipment. Felger informed the court that resolution processes for most, if not all, of these issues were underway.
