The stock market has been on a tear for more than a year now, and the Nasdaq Composite (NASDAQINDEX:^IXIC) has benefited more than most other market benchmarks. Wednesday was a mixed day in the market, but as of 2:45 p.m. EDT, the Nasdaq managed to inch higher by about a tenth of a percent.

Yet as the stock market continues to rise, companies are increasingly taking advantage of the opportunity to raise capital by selling equity interests in their businesses to a hungry investment community. That was the case in two different hot areas of the market on Wednesday, as both electric vehicle company Li Auto (NASDAQ:LI) and fintech lending platform provider Upstart Holdings (NASDAQ:UPST) found themselves moving lower after announcing capital-raising efforts.

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Li hits the brakes

Shares of Li Auto were down 11% on Wednesday afternoon. The Chinese electric vehicle company decided now was a good time to tap the capital markets, even though its stock had already fallen by nearly half from its best levels late last year.

Li proposed an offering of convertible senior notes through which it intends to raise up to $750 million. The seven-year notes will offer investors the chance to sell back their investment to Li for cash between mid-2024 and mid-2026, and they'll also have the right to convert the debt into shares of Li at their election under set conditions.

Li intends to use the money to do research and development for new vehicle models, especially battery electric vehicles. Li may also conduct R&D on related technologies, in addition to using the money for working capital and other needs.

China is a huge potential market for electric vehicles, and Li is one of many companies vying for position to serve its home country. It'll need capital to compete, but investors nevertheless weren't entirely happy with Li's timing in making its offering. Even though the debt won't immediately dilute shareholders, the potential for conversion to stock holds that threat out in the long run.

A downward move for Upstart

Similarly, Upstart Holdings saw its stock drop 12% on Wednesday afternoon. The share price for the lending platform provider has been volatile, and the company decided to take advantage of favorable conditions to build up its balance sheet for future growth.

Upstart will do a follow-on offering for 2 million shares of stock, which would raise more than $250 million at recent prices. The company didn't make any specific statements about how it'll use the cash, saying only that it intends to use the net proceeds for general corporate purposes.

Unlike Li, Upstart had relatively good timing with its offering. Although the stock is down more than 20% from its recent high, the follow-on comes after Upstart's share price more than doubled in February. Investors have been impressed at the lending platform provider's use of artificial intelligence to help financial institutions make more informed decisions about who should get loans and at what rates.

Investors are excited about Upstart's growth prospects, especially as it adds auto loans to its product lineup. Although the company needs to see wider adoption among lenders before it can declare its business model a complete success, Upstart is showing it has the wherewithal to keep finding new directions for growth.

Watch for more offerings

Upstart and Li are taking hits on Wednesday, but other companies are likely to do dilutive offerings of their own in the weeks and months to come. As long as stocks remain near records, the opportunity to raise capital will simply be too good to pass up.

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