Canoo stock price analysis: GOEV dilution risks persists

Canoo (NASDAQ: GOEV) stock price has been in a downward trend after peaking at $25 in December 2020. The shares have tumbled below $1 and are trading at $0.7306, which is a few points above the year-to-date low of $0.5226.

Canoo's future is in peril

Canoo is an electric vehicle company that is building lifestyle vehicles, multi-purpose delivery vehicles, and a pickup truck. The company has already received orders from some of the best companies in the US, including Walmart, and Kingbee. In all, these three companies have placed over 16,000 orders that are worth over $2.8 billion.

Canoo stock price jumped after the company signed a long-term lease agreement for a manufacturing plant in Oklahoma. The firm hopes to employ about 500 workers in the plant in the coming months as it ramps up production.

The most recent results showed that the company’s cash balances were $36 million. This is a relatively small amount for a company that is planning to ramp up its manufacturing activity in the coming months. For example, its capital expenditure in 2022 came in at over $400 million.

Therefore, there is a likelihood that the company will now need more money in its manufacturing stage. The company guided that it will have between $55 million and $70 million in operating expenses and between $30 million and $45 million in capital expenditures.

Therefore, it is clear that Canoo needs money soon since it will need more capital when it starts production. With liquidity in the debt market tightening, the company’s solution will be to sell shares, which will be highly dilutive. Canoo has diluted shareholders considering that its outstanding share has jumped from 30.8 million in 2018 to 269 million.

The GOEV stock price made a bullish break-out in April after its Oklahoma lease news. At the time, the shares jumped to a high of $0.8080, which was higher than the year-to-date low of $0.5247. The shares are consolidating at the 25-day and 50-day moving averages

It has also formed what looks like a bearish flag pattern, which is usually a bearish sign. The Relative Strength Index (RSI) has pointed downwards. Therefore, the shares will likely have a bearish breakdown in the coming weeks as sellers target the next key support level at $0.5035, which was about 30% below the current level.