It’s a mixed day in the overall market, but there’s no confusing the action in Lightning eMotors (NYSE:ZEV). Shares of ZEV stock are getting crushed on Thursday, down about 35%.
The first assumption would be earnings, but investors familiar with the stock will remember that it reported last week. Instead, the decline comes as the company “announced exchange agreements with certain holders of its unsecured 7.5% convertible senior notes due in 2024.”
What does it mean?
The company plans to “exchange $14.0 million aggregate principal amount of the Convertible Notes for approximately 13.3 million newly issued shares of its common stock.”
After the deal, there will still be $73.9 million of the convertible notes outstanding. The news of the convertible debt exchange is driving ZEV stock down to new 52-week lows, which comes as investors fear dilution — and potentially even more down the road.
What’s Wrong With ZEV Stock?
Today’s action creates doubt in investors’ minds. The fact we’re in the midst of a bear market surely doesn’t help matters. Nor does it help that this is a small automotive company with a market capitalization of just $60 million.
In its own words, the company “has been providing specialized and sustainable fleet solutions since 2009, deploying complete zero-emission-vehicle (ZEV) solutions for commercial fleets since 2018.”
Speaking of the aforementioned earnings report, the quarter did not impress Wall Street. While the company beat on earnings and revenue estimates, going into Thursday’s action it had fallen 19% since reporting earnings. That’s as it declined in six out of eight sessions before today.
The company is slowly but surely increasing its production. And while analysts are optimistic when it comes to revenue growth, Lightning eMotors is expected to generate an even bigger loss next year than this year.
All of that is weighing on ZEV stock. Of course, it doesn’t help that Tesla (NASDAQ:TSLA), Lucid Motors (NASDAQ:LCID) and many others are not trading well, either. That said, of the many EV-related companies out there, ZEV stock is one of the more speculative holdings at this time.
On the date of publication, Bret Kenwell 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.