Why did the Ilika share price crash last week?
The Ilika (LSE:IKA) share price has been moving like a rollercoaster over the past couple of months. Despite seeing a massive 440% rise in 2020, the stock has since acted with immense volatility. Just last week, the company published a seemingly promising trading update, only for the share price to collapse three days later. The business  Ilika is a pioneering technology company looking to find a suitable replacement for lithium-ion batteries with its own solid-state batteries. The former type is currently in high demand due to the rising popularity of electric vehicles. However, such batteries suffer from some significant drawbacks, like the difficulty of recycling and having a relatively short lifespan. 5G is here  and shares of this sleeping giant could be a great way for you to potentially profit! According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air And if you click here well show you something that could be key to unlocking 5Gs full potential... The alternative that Ilika has designed overcomes these issues and provides a higher power density ratio. In other words, they can drive further and charge faster. Thats why the management team believes the technology will become the new standard by the end of the decade. That certainly sounds exciting. And the technology is already being used on a smaller scale within medical devices and industrial wireless sensors. Ilika recently published a trading update that revealed good progress in its 70x expansion plan of small battery production. Its also starting a new collaboration with Fiat to scale up its larger electric vehicle battery manufacturing capabilities. The falling share price  As exciting as this technology may be, the firm has yet to transform itself into a profitable organisation. That undoubtedly exposes investors to additional risks. Because the management team has to find new ways to raise capital. And for a small, unprofitable business, debt financing isnt a particularly viable option. As a result, the company turned to shareholders to get its much-needed capital. Last Friday, Ilika announced a new share offer for investors to raise a total of 24.7m. But the vast majority of the newly issued shares were priced below the trading price at 140p. Thats roughly a 30% discount. Im not surprised to see the Ilika share price fall by a similar amount. Im not so sure. While the share price dropped by almost a third, the valuation remains quite rich. It currently has a market capitalisation of around 220m versus a revenue stream of only 2.3m. To me, it looks like the stock is being significantly elevated by expectations rather than fundamentals. Forecasts suggest revenue will increase substantially in 2023/24 as its large battery production ramps up. But theres a lot that can go wrong in the meantime. After all, Ilika is not the only business exploring solid-state battery technology. And theres some evidence to suggest that with nano-technology, lithium-ion batteries could be superior in the future, making this venture ultimately obsolete. Personally, I think its too soon to invest in this business. And so, for now, its staying on my watchlist.