Canoo Stock Forecast: Monday's GOEV plunge meets Tuesday buyers

Canoo (GOEV) stock is trading up more than 3% in Tuesday's premarket after a surprise share offering on Monday helped the EV small-cap to close 12.4% lower. This seemed like a major overreaction from the market, which should have seen this coming. Canoo has over $2 billion worth of orders for its vehicles but needs plenty of capital to ramp up production and bring them to market.

GOEV stock is trading up to $1.12 in the premarket after closing at $1.095 on Monday, while futures for the NASDAQ and other major indices are mixed.

Canoo stock news: Lo and behold, auto manufacturing is expensive

At the end of the third quarter, Canoo had less than $7 million on its balance sheet and had lost more than $400 million so far during the calendar year. Investors who did not see a dilution event coming must have been blind.

That did not stop GOEV stock from falling Monday on the announcement from $1.25 to a tad below $0.99 near the open. Shares drove higher from there as the 50 million shares sold in the direct offering were priced at $1.05. However, an additional 50 million warrants now exist with an exercise price of $1.30. This means that the 275 million shares outstanding last Friday became 325 million on Monday and may rise to 375 million. The shelf offering had an immediate 18% dilutive effect and the warrants would make it 36% dilutive.

With a market cap of around $300 million and no profits in sight, shareholders should have already priced in plenty of share offerings to come. That is because Canoo has its work cut out for it. Of the $2 billion worth of orders already on the books, $750 million is binding. That should provide enough interest to bring in more investors for future share offerings.

Can has been busy on all fronts of late. First, it signed a deal with GCC Olayan, a Saudi Arabian company, to provide sales and service for its vehicles in that nation. Then on February 1 Canoo received a US Department of Defense contract to provide batteries for testing and analysis purposes. Canoo had already supplied the military with a small tactical vehicle back in November.

Canoo stock forecast

GOEV stock broke through the $1.04 support range that largely held on November 22, December 27 and 29. Now the daily chart below will likely offer more downside as investors realize that this will not be the last dilution event, probably not even the last this year. Bulls may rush to enter, however, if GOEV stock breaks through the top descending trendline around $1.42. If there is anything positive on the chart it is that the Accumulation/Distribution line started to perk up in February, but we will see how it fares from here.

GOEV daily chart