Vision Marine Technologies Inc. (VMAR) shares are making waves this week, and not necessarily in a good way for existing shareholders.

The Canadian electric outboard powertrain company saw its stock price collapse 13.43% to $0.84 in after-hours trading on Tuesday, erasing a chunk of what had been an eye-popping 157% surge earlier in the day.

The Dilution Bomb Drops

Here's what happened: Vision Marine filed an amended Form F-1 registration statement with the Securities and Exchange Commission on Monday. For those keeping score at home, that's the form foreign private issuers use when they want to sell securities to the American public.

The filing reveals plans to offer up to 15.09 million common units at an assumed price of $0.53 per unit. Each unit packages together one common share and half of a common warrant. Those warrants come with an exercise price of $0.6625, which equals 125% of the assumed offering price, and they don't expire for five years.

Why does this matter? According to the filing, the company had just over 5 million common shares outstanding as of December 11. So we're talking about potentially tripling the share count here. That's the kind of dilution that makes investors run for the exits.

The Fine Print

The offering includes an interesting wrinkle: pre-funded units are available for purchasers who would otherwise exceed 4.99% beneficial ownership of outstanding common shares immediately after the offering closes. It's a technical maneuver, but essentially provides flexibility for larger investors.

ThinkEquity LLC is serving as the exclusive placement agent on a best-efforts basis. Translation: they'll try to sell the securities but aren't guaranteeing any specific amount gets sold. The offering is set to terminate on December 31.

The Bigger Picture

This wild price action comes against a brutal backdrop for Vision Marine shareholders. The stock has plummeted 93.54% year-to-date, and the company now carries a market capitalization of just $4.89 million. Shares have traded in an annual range spanning from $0.37 to $38.60, highlighting just how volatile this ride has been.

Tuesday's regular session saw VMAR surge 156.77%, closing at $0.98. But that after-hours selloff following the dilution news suggests investors quickly figured out what was driving the earlier rally and adjusted their expectations accordingly.