AI dominates the daily headlines a lot like electric vehicles (EVs) did a few years ago.

Today, the hype around EVs feels like a story from the distant past. EV demand has slowed more than many anticipated, and the recent expiration of U.S. tax credits adds another headwind.

Despite the slowing demand, several EV-focused automaker stocks continue to trade at valuations which imply growth rates that are increasingly out of step with today’s reality.

This week’s Danger Zone pick is one of those stocks. And, it has all the characteristics of a Zombie Stock: continually dilutes shareholders, has never turned a profit, and faces growing industry headwinds. And yet the stock’s valuation implies the company will profitably sell more vehicles than the best-selling passenger car in America within the next 10 years.

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This stock could fall further based on:

  • consistently high cash burn,
  • heavy shareholder dilution,
  • the projected plummet in electric vehicle (EV) demand,
  • much more profitable competitors, and
  • a stock valuation that implies this company will sell more vehicles than the best-selling passenger car in America.

Losses Piling Up

Bulls have long tried to justify this company’s, as with other EV makers, large losses by arguing the company is simply in a high-growth phase. While there is no doubt that the company is growing its top-line quickly, its losses are growing just as fast. So, it’s hard to see how the company will ever achieve economies of scale.

The company has grown revenue from just $4 million in 2020 to $929 million in the TTM ended 2Q25. The company’s net operating profit after-tax (NOPAT) fell from -$589 million to -$2.3 billion over the same time. See Figure 1.

In the TTM, the company’s return on invested capital (ROIC) is -23% while its NOPAT margin sits at -252%.

Figure 1: Revenue & NOPAT: 2020 – TTM Ended 2Q25

Sources: New Constructs, LLC and company filings.   

Zombie-Like Cash Burn

Since 2021, this company has burned $17.9 billion (148% of enterprise value) in free cash flow (FCF) excluding acquisitions. See Figure 3. The company burned $3.3 billion in FCF excluding acquisitions over the TTM.

Not surprisingly, the company’s economic earnings, the true cash flows of the business that take into account changes to the balance sheet, fell from -$671 million in 2020 to -$3.4 billion in the TTM ended 2Q25.

Despite having $3.6 billion of cash on hand as of June 30, 2025, the company can only sustain its TTM cash burn rate for 10 months from the end of September 2025.

Given the large cash burn, and short cash runway, it is not surprising that the company is already preparing investors for an additional equity raise.

This company meets all the criteria of a Zombie Stock, but we aren’t putting it back on the list because a prominent investor group remains its largest shareholder.

If the company’s business doesn’t improve, and the current investors show any unwillingness to re-invest in the company, we’ll be ready to add it back to the Zombie Stock list.

Figure 2: Cumulative FCF Excluding Acquisitions: 2021 – 1H25

Sources: New Constructs, LLC and company filings.   

Shareholders Get More Diluted

This company’s shareholders are no stranger to equity raises and ongoing dilution. Per Figure 3, the company’s shares outstanding increased from 3 million in 2020 to 282 million in 2Q25.

Whether through new share issuances or stock-based compensation, funding the business with new investors capital is not sustainable and not that different from a ponzi scheme.

Figure 3: Shares Outstanding: 2020 – 2Q25

Sources: New Constructs, LLC and company filings.   

…there’s much more in the full report. You can buy the report a la carte here.

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I’ll keep sending information on low quality sectors, industries, or specific companies until you’re ready to start your membership, but know that we expect this Danger Zone pick to underperform.

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