(Bloomberg) — 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, whose shares surged more than 50% when the news broke on Tuesday. Walmart could also wind up owning more than one-fifth of Canoo through a warrant issued to the retailer as part of the deal.
The caveat blocking sales to Amazon, as well as details about the warrant, were disclosed in a securities filing 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 a 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.
The rest of the shares vest quarterly and in proportion to any payments Walmart makes to Canoo for its vehicles, up to $300 million, at which point all 61.2 million will have vested.
Walmart would own more than 20% of Canoo if it exercises all of the shares allotted.
Canoo shares fell 6.8% to $3.39 as of 10:26 a.m. in New York. The stock is down about 57% 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.
(Updates with additional details on warrant and potential stake in sixth paragraph.)
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