Just because you believe that a market sector will grow in the coming years, doesn’t mean every company deserves your investment capital. A prime example is electric vehicle (EV) manufacturer Arcimoto (NASDAQ:FUV). The FUV stock price has already declined substantially, and more downside is likely. After discovering the company’s delivery data and desperate self-preservation tactics, prospective shareholders will probably choose to avoid Arcimoto.
Headquartered in Oregon, Arcimoto produces small, three-wheeled EVs that are “purpose-built for daily driving, local delivery, and emergency response.” Arcimoto’s vehicles are rather unusual-looking. Maybe they’ll become popular someday.
Or maybe there won’t be enough time for this vision to come to fruition, especially if Arcimoto runs out of cash or gets delisted from the Nasdaq exchange. All in all, you’ll likely find that Arcimoto is unique and fascinating but doesn’t deliver enough vehicles and is too risky to invest in now.
FUV Stock Delisting Threat Is Avoided for Now
FUV stock is one of those stocks that has a somewhat deceptive chart, due to the reverse-split effect. At first glance, you might think that the Arcimoto share price actually declined from $600 to $2 and change.
The current share price is, indeed, $2 and change. However, it never actually ran as high as $600. Here’s what happened. In November, Arcimoto reportedly announced a 1-for-20 reverse stock split.
At that time, FUV stock traded below $1. Sometimes, the Nasdaq exchange has delisted stocks that trade below $1 for too long.
Not long afterward, Arcimoto enacted the 1-for-20 reverse stock split. The company also reportedly revealed it had received a noncompliance notification from the Nasdaq exchange due to the stock closing below $1 for 30 consecutive business days.
Arcimoto’s Financial Problems Aren’t Permanently Fixed
FUV stock has declined since then, and it appears to be heading closer to the $1 level again. Clearly, the reverse split wasn’t a permanent solution for Arcimoto’s deeper problems.
In particular, the company had burned through a lot of cash, and Arcimoto’s balance of cash and cash equivalents was down to $1.25 million in November. Furthermore, as of Jan. 19, 2023, Arcimoto apparently burned through $166 million or more.
That’s a whole lot of cash burn for a company with a market capitalization of around $15 million. Presumably to address this problem, Arcimoto sold 4 million of its common stock shares in a public offering, plus warrants to purchase another 4 million common stock shares.
This tactic may have scored a quick and seemingly easy $12 million for Arcimoto, but it’s not “free money” by any means. There’s a price to pay as investors might worry about the dilutive effect as Arcimoto prints and sells so many shares.
Besides, investors might wonder how quickly Arcimoto will burn through that $12 million. Just recently, it was reported that Arcimoto halted vehicle production. That’s definitely not a good sign.
Additionally, bear in mind that Arcimoto hasn’t delivered many vehicles. In fact, the company only delivered 74 customer vehicles during 2022’s third quarter. This may indeed be the “highest quarter of customer deliveries in Arcimoto’s history,” but is that really something to brag about?
Now Is Not the Time to Buy FUV Stock
At this point, it’s hard to predict what self-preservation tactics Arcimoto might use next. What’s really needed is a sign that Arcimoto is delivering EVs in large volumes.
Also, the company ought to ease up on its cash burn. Frankly, it’s possible that FUV stock is headed toward zero. Arcimoto may end up enacting another reverse share split, or even two or three of them at some point. With all of that in mind, you can choose to sidestep all of Arcimoto’s issues and temporary fixes by simply not investing in the company.
On the date of publication, David Moadel 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.