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Flood of new and cheap shares sink Nikola stock

Electric truck startup stock slips below $40 after trading above $90 six weeks ago

Nikola's battery and fuel cell-powered electric trucks are still a ways off. Shares in the newly public company are falling as early investors register to sell. (Photo: Nikola)

Holders of warrants for new stock and early investors who bought discounted shares in electric truck startup Nikola Corp. (NASDAQ: NKLA) poised to head for the exits after trading hours on Friday.

In a prospectus filed with the U.S. Securities and Exchange Commission, Nikola said it would receive about $274 million from the sale of 23 million new shares. Those shares will be added to the current 361 million shares.

But Nikola gets nothing from owners who purchased 53 million shares in VectoIQ. The special purpose acquisition company (SPAC) brought Nikola public in a reverse merger on June 2. Investors, including mutual fund giant Fidelity, bought shares at $10 each in a private investment in public equity (PIPE) that raised $525 million. 

Preparing to leave the building

Fidelity registered to sell nearly 18 million shares spread across 17 of its mutual funds.The Central Bank of Norway registered 10 million shares for sale and the Value Act Spring Master Fund put up 5 million of its nearly 11.7 million shares. Blackrock Inc. registered 500,000 shares and exercised about 62,000 warrants for new shares.

Nikola received the PIPE funds and $230 million raised by VectoIQ in its own initial public offering in 2018. VectoIQ looked at more than 100 clean transportation companies before settling on Nikola as its merger partner. 

VectoIQ CEO and Nikola board member Steve Girsky registered 181,000 of his 1.573 million shares for sale. The former General Motors Co. vice chairman was among five former GM executives to register shares for sale.

A volatile trade from Day One

Volatile trading of Nikola shares has been the rule in the six weeks since it began trading on June 4. Shares traded 103% higher on their third day, surpassing $90 a share. Since then, shares have bounced up and down, drifting lower overall. At market close Friday, they were down 7.02% at $48,44. They lost another 14.46% after hours, closing at $41.78.

Investor site Seeking Alpha said more than 3 million shares changed hands after hours.

Early July data from S3 Partners, which tracks short-selling interest, showed that about 10% of Nikola shares being held were betting the stock price would fall. Nikola Executive Chairman Trevor Milton parries with short sellers on Twitter. He encourages holders to stay in for the long haul and see the company transform trucking.

Roller coaster rides

Seemingly every announcement affecting the company takes the stock on a roller coaster ride. The initiation of coverage by Cowen & Co., J.P. Morgan and most recently Deutsche Bank all point to the potential for Nikola to change trucking with battery electric and hydrogen-power fuel cells.

Nikola often is compared to Tesla Inc., which dominates the early market for battery-electric passenger cars. Both companies take their names from late 19th and early 20th century inventor Nikola Tesla.

“Nikola offers investors a rare pure way to invest in zero-emission commercial trucks, whose adoption is poised to take off driven by global regulations,” Deutsche Bank analyst Emmanuel Rosner wrote to clients on July 16.

Waiting for revenue

The most-often repeated criticism of Nikola is that it has yet to produce a vehicle or generate significant revenue. The company will begin producing battery-powered heavy-duty trucks in a joint venture with IVECO in Ulm, Germany in mid-2021. Nikola breaks ground for its own plant in Coolidge, Arizona, south of Phoenix next Thursday, July 23.

In an investor presentation released at the end of the first quarter, Nikola said it expects to ship 12.000 vehicles in North America at the end of 2024, generating $3.2 billion in revenue and a profit of $145 million. That equates to earnings before interest, taxes, depreciation and amortization (EBITDA) of 6.6%. 

Nikola claims 14,000 heavy-duty truck orders worth $10 billion. But those are not yet contracts. It sold out pre-order packages of its Badger battery-electric pickup in late June, collecting $5,000 deposits for the high-end model. Equipped with a fuel cell range extender, the Badger is capable of doubling the driving range to 600 miles on a single charge, Nikola claims.

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.