Fisker (NYSE:FSR) detailed ongoing operating and capital spending plans in its latest Q1 earnings release on May 17. A capital raise looks likely for the electric vehicle (EV) car maker, and likely to wreak havoc on FSR stock, at least until investors have visibility on when, exactly, they can expect Fisker to start producing free cash flow.

Here is the good news. The CA-based company has $987 million in cash on its balance sheet as of March 31. Moreover, it did not spend much during Q1, just $28.8 million in operating costs and $65.665 million in capex spending. That totals $94.465 million in cash burn for the quarter.

Cash Won’t Last

But here is the bad news. Fisker won’t be able to deliver its first EV, the all-electric Ocean SUV until Q4 2022. Moreover, it may not be free cash flow (FCF) positive until several quarters after this, or maybe up until a year later. That means its cash has to last that long, covering its pre-production costs and post-production losses.

Based on the pre-production costs that the company forecast it will have for just this year, it looks like there won’t be enough cash to cover all these expenses. For example, in the section on page 3 of the earnings release entitled “2021 Business Outlook,” Fisker detailed its 2021 forecast expenses.

The net result is that up to $270 million in operating costs could be required, and up to $240 million in capex spending. That totals $510 million for the year, less $94.465 million already spent in Q1. This means that the company may have to spend $415.5 million more by the end of 2021. In this situation, I am assuming the worst, even though Fisker gave an expected range.

If this happens, the cash balance will fall to $571.5 million by the end of the year (i.e., $987 million cash minus $415.5 in remaining 2021 spending). And this doesn’t account for whatever spending will be necessary all through 2022.

Keep in mind that the company d0esn’t expect to begin deliveries of its Ocean SUV until sometime in Q4. So even if spending is just three-quarters of the total in 2021, it will use up another $382.5 million. Now the cash balance will be dangerously low at $189 million.

And remember it will still have to fund losses for a few quarters. that could use up another $150 million in negative free cash flow. Effectively the balance will be down to $40 million. that is well bel0w a margin of error for the company.

What This Means for FSR Stock

By the time it becomes apparent that the company will need to raise more cash, FSR stock will be significantly lower. That is because investors will be anticipating a dilutive cash raise. For example, at today’s market value of $5.2 billion, a $500 million equity capital raise would dilute shareholders nearly 10%.

In fact, if management waits too long, well into next year, FSR stock could fall another 50%. That would lower its market value to $2.6 billion. So if it wanted to raise another $500 million in equity capital, the dilution would be 19.2% (i.e., $500 million/$2.25 billion). That alone would cause the stock to fall nearly another 20%. So, you can see that it can quickly become a vicious cycle.

The Lordstown Warning For FSR Stock

That’s exactly what has happened recently with Lordstown Motors (NASDAQ:RIDE). On May 17, I warned investors that, “Lordstown Motors Is Going to Need a Capital Raise Sooner Than Later.” Recently the company warned that it will need additional funds in an SEC filing. And just as suddenly, the CEO and CFO resigned.

Investors should be skeptical when it comes to Fisker. I highly suspect that the company’s 2022 spending plans could drain huge portions of its remaining cash balance. For example, prior to production, the company will have to ramp up marketing spending. As a result, Fisker won’t be anywhere near its present $5.2 billion market capitalization. FSR stock will be much lower

Moreover, as one Seeking Alpha analyst so deftly points out, Fisker has many other issues. It faces severe and ruthless competition in the EV market, including from much better-capitalized companies that are already producing EVs.

In addition, despite the fact that it has 14,000 reservations, these are all reimbursable, not fully paid. Seeking Alpha believes that a number of the reservations are from ride-hailing companies that won’t want to wait until the end of 2022 to receive their EVs.

I suspect that once the market realizes that Fisker could need another capital raise, FSR stock will fall at least 20% from here. Most investors will wait until the stock is below $7.00 before they see if it is a bargain opportunity.

On the date of publication, Mark R. Hake did not own any security mentioned in the 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.