Earlier today, The Lion Electric Company (TSE:LEV)(NYSE:LEV), which manufactures electric medium and heavy-duty vehicles, announced an equity raise that sent the stock 18% lower for the day. LEV will raise $50 million by issuing just under 19.7 million units at a price of $2.54 each. One unit will consist of one share of LEV and one purchase warrant at an exercise price of $2.80. Lion Electric plans to use these funds to support its growth initiatives and balance sheet. However, it looks like more dilution will happen in the future because the company only had $66.6 million of cash and equivalents as of September 30 and has burned close to $315 million in the past year.
Therefore, this extra $50 million is likely to be used up pretty quickly at this rate. Overall, it’s a tough time for LEV investors.
Interestingly, the stock finished the day at $2.19/share despite the offering price of $2.54. Clearly, investors don’t like this dilution. For a company with a $426 million market cap (closer to $500 million at the issue price of $2.54), a $50 million offering is quite substantial.
Is LEV Stock a Buy, According to Analysts?
Turning to Wall Street, LEV stock comes in as a Moderate Buy based on two Buys and two Holds assigned in the past three months. Also, the average LEV price target of $4.13 implies 88.6% upside potential.
