The Novonix Ltd (ASX: NVX) share price is trading 2.91% down at $2.00 during Wednesday afternoon trading.
This week, the lithium battery materials company has lost 13.5% of its value on the ASX.
That's even more concerning when you consider that over the entire month of November, Novonix shares fell 16%, which made them among the worst-performing ASX 200 shares of the month.
With no news from the company so far in December, this week's losses are likely a hangover from November. The likely reason for the Novonix share price tumble last month is two-fold.
Firstly, there was probably some profit-taking after the Novonix share price gained 50% in October.
The gains followed news that the United States Department of Energy had awarded Novonix a US$150 million grant for the expansion of its anode materials plant in Tennessee.
The second is China's COVID-zero policy and lockdowns. This has wreaked global economic havoc and impacted many businesses associated with the global electric vehicle (EV) market.
Why is the Novonix share price so volatile?
As my colleague Brooke recently reported, investors have been turning their backs on unprofitable companies during these tough economic times. They're not so keen on ASX tech stocks either.
This is because inflation is going up, which means younger companies not yet making a profit are facing major cost headwinds.
On top of that, interest rates are going up. Younger companies typically have more debt to finance their growth and development, so investors are wary of them right now, too.
That's why the S&P/ASX 200 Information Technology Index (ASX: XIJ) has lost more than a third of its value in the year to date. The tech sector in Australia is in its infancy compared to the US.
But there's more to Novonix's volatility than macro issues.
A warning bell for Novonix shareholders was rung in September when the company's auditors, PriceWaterhouseCoopers (PWC) said "a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern". Eek.
In its 2022 annual report, Novonix reported a loss after tax of $71 million and about $40 million in net cash outflows.
PWC also noted that Novonix "remains dependent upon raising additional funding to finance its ongoing expansionary activities".
Yeah, this makes Novonix shares not so appealing for the moment, especially for risk-averse investors.
In addition, Novonix is a small-cap share. It goes without saying that smaller companies typically experience more volatility than established blue-chip shares because they simply don't have the same level of investor support.
What's the latest at Novonix?
Novonix is a battery materials and technology company. It's figured out a way to produce synthetic graphite anode material for lithium-ion batteries. It says this is safer and more environmentally friendly than naturally occurring graphite.
Novonix says demand for its anode material is increasing in the US. This is largely due to the growing local EV market and the US's desire not to be so reliant on Chinese graphite producers.
Novonix hopes to become a major alternative local supplier. It has multiple facilities in Chattanooga, Tennessee and is trying to scale up production as fast as possible.
The US grant, announced in October, will be used to support this goal.
Novonix aims to increase production capacity to 10,000 metric tonnes of synthetic graphite per annum (tpa) by 2023. It is targeting 40,000 tpa by 2025 and 150,000 tpa by 2030.
Novonix expects to spend about US$1 billion on its expansion between 2023 and 2025.
