Lordstown Motors (NASDAQ:RIDE) reported its earnings for 2020 on March 17, showing that it lost $101 million and had just $630 million in cash. It is going to need another cash raise fairly soon within the next year. That is going to hurt RIDE stock even further as if there wasn’t already enough bad news.

Even a cursory analysis of the numbers shows that they don’t add up. The electric light-duty truck maker said it expects to spend $250 to $275 million in capital expenditure (“capex”). It could run out of money. Here is how that could happen.

Cash Burn Estimates

Last year Lordstown burnt through $122.5 million in negative free cash flow (FCF), from page 54 of its 10-K filing. This included $64.3 million in negative cash flow from operations (CFFO) – basically its overhead and working capital. It also spent $58.2 million on capex.

So the planned 2021 $275 capex is a ramp-up as Lordstown builds out its production line for its Endurance electric pickup truck. But don’t forget that the company will also have negative CFFO costs — probably a bit higher than last year at $75 million.

So the total cash burn this year, before any marketing expenses, just to get the Endurance production line going, will be $350 million. It could easily have to spend another $100 million in marketing and competitive ad spend and discounts to attract people to buy the Endurance. So the total cash drain could be as high as $450 million.

Now the cash balance by the end of the year or by the end of Q1 2022 could be as low as $180 million. That is at a red flag level. For example, if there is any delay, which is highly possible, in the company’s planned Sept. 2021 production of the Endurance in its factory, the cash burn would be higher.

Moreover, the company also says its plans on accelerating the development of a van to start production in the second half of 2022. This will also be a huge cash drain.

This is essentially the argument that a recent Seeking Alpha author made in their article: “Lordstown: Don’t Catch the Falling Knife.” The author also lists other bad news. This includes ramifications from the March 12 short report from Hindenburg Research, the U.S. Securities and Exchange Commission (SEC) investigation, which was announced a month after it started, and other issues.

What To Do With RIDE Stock

RIDE stock has fallen $23.17 from its peak on Feb. 11 of $31.57 to $8.40 as of May 17. This is a drop of 73.4%. Since the end of March, it is down 28.6% from $11.77.

The problem is the CEO Steve Burn apparently inflated his order book of Endurance electric trucks, especially by calling his pre-orders as solid sales. People felt lied to. The stock faltered amid a loss of credibility.

Nevertheless, the company has cash. It has a factory. Morgan Stanley reported recently that he is keeping “an open mind” about its valuation. For example, he postulated that worse comes to worst, the factory could be used for other manufacturing purposes.

The analyst cited the fact that the factory has a 600,000 unit manufacturing capacity, including tooling and permitting. It could be used for battery making or electric vehicle skateboard manufacturing.

Nevertheless, RIDE stock is likely going to continue falling, especially now that it seems clear that it will need more cash to really get its product launched.

Given that it has a $1.37 billion market capitalization now, assuming another $500 million capital raise, the dilution would be 26.7% post-money. This is calculated by dividing $500 million by $1.37 plus $500 million.

Therefore, expect to see RIDE stock fall at least another 27% to 30% from here, given this potential dilution. That puts its value at about $4.80 or so. That is not a good outlook for the stock and most investors will likely stay away until there is better news.

On the date of publication, Mark R. Hake did not hold a long or short position in any of the securities in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.