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Nikola shares crater as early investor lockup lifts

Shares in electric truck startup Nikola Corp. cratered for a second consecutive day as early investors sold shares on their first day freed from lockup. (Photo: Nikola)

Shares in electric startup Nikola Corp. (NASDAQ: NKLA) cratered for a second consecutive day Tuesday. Early investors sold shares on their first day freed from lockup.  

Shares closed at $17.37, down $3.04 or 14.89%. Trading was 2.5 times the company’s average. A total of 161 million shares, about 45% of equity in the company, was newly available. Most of those shares — 91.6 million — are owned by founder Trevor Milton. It was unknown how many shares Milton may have sold. At their nadir, shares were as low as $16.67.

Milton resigned as executive chairman and gave up his seat on the board in September following a scathing report by short seller Hindenburg Research, The allegations of fraud attracted the attention of the Justice Department and the Securities and Exchange Commission. Both issued subpoenas to Milton and current Nikola executives.

GM back pedals on equity stake

Tuesday’s price drop followed a 25% decline on Monday when General Motors Co. (NYSE: GM) said it would not take an equity stake in Nikola. GM and Nikola announced a wide-ranging tie-up under which GM would get newly issued shares equal to 11% of Nikola ownership.

That Sept. 8 agreement sent shares in Nikola and GM dramatically higher. But the deal began to unravel two days later when Hindenburg published its 67-page report. 

GM delayed a Sept. 30 closing on the deal. Instead, the two companies signed a nonbinding memorandum of understanding that may lead to GM supplying its hydrotec fuel cell stacks to Nikola in the future.

“In a nutshell, the signing of GM as a partner is a positive but ultimately no ownership/equity stake in Nikola and the billions of R&D potentially now off the table is a major negative blow to the Nikola story,” Wedbush Securities analyst Daniel Ives wrote in an investor note Monday. Ives has a $15 target price on Nikola stock.

Analysts split on how much of a blow the GM walkway meant to Nikola. J.P. Morgan analyst Paul Coster maintained his $40-a-share target.

“A Nikola pullback could be a good buying opportunity, in our view,” he wrote in an investor note Monday as the lockup on early investors neared expiration.

GM declining to manufacture the Nikola Badger electric pickup truck ended a distraction to Nikola’s plan to build battery-electric and fuel cell-power heavy-duty trucks and create a hydrogen fueling infrastructure, Coster wrote. And it saved $700 million that Nikola would have had to pay GM to build 50,000 Badgers a year.

Short sellers predict single-digit stock price

Potential short sellers hoping to make money on the falling stock price published various screeds on investor site Seeking Alpha.

“Nikola will be remembered as a company that chased and cashed-in on the electric vehicle trend, but didn’t have the fundamentals to support the valuation,” wrote MangoTree Analysis, which predicted the shares would fall to $3.50. 

“Quite frankly, I wouldn’t be surprised to see the shares trade in the single digits going into 2021,” wrote contributor Henrik Alix.

At its peak in June after going public in a reverse merger with VectoIQ Acquisition Corp., Nikola traded as high as $93.99.

Click for more FreightWaves articles by Alan Adler.

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Alan Adler

Alan Adler is an award-winning journalist who worked for The Associated Press and the Detroit Free Press. He also spent two decades in domestic and international media relations and executive communications with General Motors.