What happened
Investors crushed the shares of electric vehicle (EV) start-up Canoo (GOEV -6.77%) Monday after details emerged of its latest round of raising capital. The stock dropped by more than 20% before paring that loss. As of 10:43 a.m. ET, Canoo shares were still down by 11.7%. Shareholders have now absorbed a loss of more than 80% over the last 12 months.
So what
Today's drop comes after the company said it would raise more than $50 million by selling new shares to institutional investors at a discounted price. The company will bring in $52.5 million by selling shares to certain investors at $1.05 per share. That compares to Friday's closing price of $1.25 per share. The move substantially dilutes existing shareholders, as additional warrants could result in up to 100 million new shares.
Image source: Canoo.
Now what
The good news for investors with a long-term outlook is that Canoo continues to make progress on its business plan. Last week the company announced a new contract from the Department of Defense (DoD) to test and analyze Canoo's battery modules for a potential supply agreement. The DoD has already been testing one of the company's Light Tactical Vehicles since last fall.
That underlying business news likely explains the rebound in Canoo shares today after the initial plunge. But the company still has a long road ahead to traction in its business. Shareholders have already experienced dilution of more than 40% over the last year, and the new shares will be another significant addition to the current share count of approximately 350 million. The stock remains a speculative bet for investors.
