This has been a tough year for EV stocks and SPACs. Add to that list the problems facing Canoo (NASDAQ:GOEV) stock.

GOEV stock is down 45% so far in 2021, falling to less than $8 per share. The company’s most recent quarterly report showed its losses mounting. And Canoo in May announced it was the subject of a Securities and Exchange Commission fact-finding inquiry.

At least with the latter, Canoo finds itself in good company. Two EV startup competitors, Nikola (NASDAQ:NKLA) and Lordstown Motors (NASDAQ:RIDE) also disclosed SEC investigations.

Canoo went public by merging with a special purpose acquisition capital company, or SPAC, Hennessey Capital Acquisition Corp last year.

The problems facing Canoo are nothing new for electric vehicle companies and SPACs. There are so many similarities that I could use a copy-paste list of main features. The most important of them would be pre-revenue, operating losses, net losses, burning cash and poor fundamentals. And, of course, a stock price that surged based on early enthusiasm and then faltered as investors realized that hopes and dreams is not a solid investment.

Canoo had plenty of negative news, from changes to its management and its business plan to its SEC investigation. The result is that it’s gathering a lot of speculation about whether it is a viable company that can make a difference in the EV market.

Business Plans: A Dramatic Change

An article on Green Car Reports stated that Canoo is changing moving away from subscriptions and automaker partnerships and toward fleet sales. The company is halting its partnership with Hyundai (OTCMKTS:HYMTF) to focus on making and selling its own vehicles to commercial fleets.

Canoo is focusing on the phrase and idea “How we see it” to present its vision and business goals. But the way I see it now is that by ending its partnership with Hyundai, Canoo lost its focus and a great opportunity to develop and gather know-how.

In another article, I read that Canoo wants to deliver its expertise and sell components to other automakers. Is this a bad joke?

Being an EV startup and having plans to reach production in 2022 and 2023 is all about paying attention to every detail, reorganize all strategic activities and allow no mistakes at all.

I consider the decision of ending a partnership with Hyundai a costly mistake that shows arrogance by Canoo. With 9,500 pre-orders but no binding orders, many things can go wrong. And any production delays even due to Covid-19 can be detrimental to GOEV stock. Cash is king and making sales is essential.

I consider it a risky business plan to abandon its subscription model and instead focus on sales. Canoo’s vehicles start at about $33,000 and include a lifestyle vehicle, a pickup and a multi-purpose delivery vehicle. That’s not an exciting lineup for consumers.

Even this starting cost has no competitive advantage at all. There are more established EV makers offering models in that range of $30,000 up to $50,000. With untested official reports yet on the reliability of Canoo’s models and any early-stage manufacturing production problems that may arise, I am too skeptical on the path of future sales.

The SEC Investigation

CEO Tony Aquila disclosed in May that the SEC opened an investigation into Canoo, according to an article posted on The Verge.

The probe is broad, though the startup said in a regulatory filing that the SEC has characterized it as a “fact-finding inquiry,” and that the agency has not yet concluded whether anyone violated the law. It covers Canoo’s SPAC merger plus its “operations, business model, revenues, revenue strategy, customer agreements, earnings and other related topics, along with the recent departures of certain of the Company’s officers.”

Well, how is this a fact-finding inquiry when the SEC is investigating many aspects such as operations, revenue strategy, earnings, and even management changes? To me, it is a much deeper investigation into several crucial business aspects. And until it is finalized it is also a red flag to invest in GOEV stock.

Financials: Where Everything Starts and Ends

The company’s second quarter earnings report showed a deeper loss amid stronger pre-order numbers.

Losses were at 50 cents per share on zero revenue. The company said it had cash and cash equivalents of $563.6 million, which is down from $641.9 million at the end of the first quarter. It said the company’s non-binding orders were more than 9,500, an increase from 9,000 in June.

The loss is not a surprise. I expect capital expenditures to increase in the coming quarters as production comes closer and that should make burning cash even worse until revenue kicks in.

A pre-revenue company with only pre-orders with an SEC investigation and a vague business plan strategy is a big “no” for me now. GOEV stock is too pricey, too risky and too uncertain.

On the date of publication, Stavros Georgiadis, CFA  did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.