Canoo CEO can buy bankrupt EV startup’s assets, judge rules

The sale of bankrupt EV startup Canoo’s assets to its CEO has been approved by the judge overseeing the case. After evaluating a number of limited objections to the sale, Judge Brendan Shannon said in a hearing Wednesday he believes the process was fair and that no one else but Canoo CEO Anthony Aquila made a bid.

Shannon’s decision paves the way for Aquila to buy most of the assets of the EV startup for around $4 million in cash. Aquila plans to offer services to customers such as NASA and the Department of Defense, which purchased a few Canoo vehicles before the company went under, according to lawyers representing the CEO.

Canoo is the latest failure in a wave of EV startups to file for bankruptcy, a list that includes Fisker, Lordstown Motors, and Nikola.

Canoo is also not the only one of these companies to have had a CEO try to buy up the assets. Lordstown Motors’ founder and former CEO, Steve Burns, bought most of the assets of his company in bankruptcy, and now newly pardoned Nikola founder and former CEO Trevor Milton is trying to do the same with his startup.

Aquila was not the only one interested in Canoo’s assets.

Mark Felger, a lawyer for Canoo, said during the hearing that as many as eight parties other than Aquila signed NDAs and evaluated what was for sale. Only a handful of those came close to making a bid, he said, including one group that the bankruptcy trustee said could raise concerns with the Committee on Foreign Investment in the United States because of its (unspecified) “foreign ownership.”

Most notable of the parties that nearly bid on the assets was Harbinger, an electric truck startup that recently objected to the sale and claimed Canoo was hiding assets from potential buyers. Lawyers for Aquila said in a reply that Harbinger’s objection was “without merit and devoid of any factual support.”

Harbinger’s founding team and many of its earliest employees split off from Canoo to create the new startup in 2021. Canoo accused those founders of misappropriating trade secrets on the way out in a lawsuit filed in late 2022, which is still ongoing.

The outcome of that lawsuit became a centerpiece of the sale of Canoo’s assets. The trustee believes that a Canoo victory in the case could bring in a big hunk of money and also a potential injunction against Harbinger using any of those trade secrets.

John Morris, a lawyer for Harbinger, stressed in the hearing that, despite two years in court, no one outside Aquila even knows what trade secrets were supposedly misappropriated. Canoo never specified, even under seal, what it believes Harbinger allegedly stole.

Harbinger’s objection to the sale partially dealt with this, claiming that the trustee or the appraisal firm could therefore not properly value the estate — meaning potential bidders weren’t fully informed.

Morris also raised the issue of a specific clause in the sale agreement that gives Aquila the ultimate approval over any potential settlement in the lawsuit with Canoo.

Morris argued the trustee had abandoned his fiduciary duty to the estate by giving a possibly conflicted Aquila final say over any settlement. Shannon ultimately disagreed.

Shannon referenced the trustee’s testimony that negotiations with Aquila took weeks and involved a number of offers and counteroffers as evidence the sale was properly considered. He said Aquila’s relationship to the company was properly disclosed.

“The trustee has run a process that has resulted in a significant offer,” and the sale has been “proceeding in good faith,” he said.

Other objections to the sale mostly came from companies that either have outstanding balances with Canoo or are still holding on to equipment. Felger told the court Wednesday that most, if not all, of those are in the process of being resolved.

This story has been updated to include the judge’s final order and a reply from WHS Energy Solutions, the entity controlled by Aquila.