In February 2021, at the height of the meme stock phenomenon, Ideanomics (NASDAQ:IDEX) stock traded for as much as $5.53 per share.
Today, you can buy IDEX stock for a little more than 25 cents a share, a 95% discount to its multi-year high-water mark.
If you’re a risk-hungry investor, this may seem tempting. After all, wouldn’t renewed investor enthusiasm likely result in a massive move higher? In theory, yes. However, whether it is possible for this to happen is another question.
Ideanomics’ operational performance has worsened since last year and continues to deteriorate. Couple that with the fact that the speculative frenzy experienced during 2021 isn’t likely to return anytime soon, and there’s more to suggest there’s big downside risk, not big upside potential, with this stock.
IDEX Stock at a Glance
Ideanomics may be grouped in with other small, early-stage EV stocks, but unlike most of its peers, the word “focus” doesn’t seem to be in its management’s vocabulary. Instead of putting all of its efforts into creating one large electric vehicle business, the company is attempting to scale up several EV startups at once.
In my last article on IDEX stock, I detailed Ideanomics’ grab bag of ventures. These ventures are involved in areas as varied as wireless EV charging solutions, electric motorcycles, electric tractors, and even electric street sweepers.
Don’t get me wrong, in some cases, diversification can be a positive. However, this company is not one of those situations. Check out other commentaries on this stock, and you’ll see the phrase “jack of all trades, master of none” thrown around.
Based on the company’s financials from over the past four quarters, this phrase is an apt descriptor. For the quarter ending June 30, revenue was up only around 14.5% year-over-year. Even worse, the company’s losses have ballooned, rising fivefold to $37.8 million (or 8 cents per share) compared to the prior year’s quarter.
High Cash Burn Points to Further Price Declines
Although the analyst community forecasts Ideanomics’ sales growth to pick back up in the coming year, high losses are also set to continue. In 2023, the sell-side anticipates full-year losses of 24 cents per share, or around $118.7 million, based on the company’s current share count.
With just $85.5 million in cash on hand, this means Ideanomics needs to raise more cash to keep all its plates spinning. The company has a financing source in place, but using this method will come at the expense of existing shareholders.
Ideanomics is raising more capital via a standby equity purchase agreement, or SEPA, with an institutional investor. Last month, this SEPA was amended, to enable the company to sell up to 150 million additional shares of IDEX stock to this investor over the next three years.
This company is no stranger to shareholder dilution. The IDEX share count has more than tripled since 2020, due to its use of dilutive financing methods. With prior dilution also playing a role in the stock’s price decline so far, you can expect further dilution to have a similar impact.
The Takeaway With IDEX Stock
Ideanomics may be taking a unique approach by pursuing multiple opportunities at once. Unfortunately, this approach is failing to produce a different outcome. Like other “also-ran” EV contenders, this company continues to face the challenges of rising losses, and undercapitalization.
With little to indicate that all or even some of IDEX’s varied ventures are on the verge of taking off, it’s best to expect its poor operating performance to continue. In turn, raising the need to tap into its SEPA to raise more capital, to the detriment of its stock price.
This is a situation that stands to go from bad to worse, with little to signal big improvements are just around the corner. The best move for investors is to take a hard pass on IDEX stock.
IDEX stock earns an F rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.