Editor’s Note: CORRECTS to remove reference to Tumim as an investment bank and to reflect that Nikola still plans follow-on stock offering.
Nikola Corp. (NASDAQ: NKLA) will sell up to $300 million in new shares to Tumim Stone Capital, seizing an opportunity to access new money for early electric truck production while still planning to offer new shares in a follow-on stock offering and to sell convertible debt as soon as this summer.
Nikola filed an S-1 in May with the Securities and Exchange Commission declaring its intent to sell at least $100 million in new shares on top of the 396 million outstanding. It expects to need as much as $1.5 billion to scale production of its electric trucks and hydrogen fueling station network over the next 18 months.
In an 8-K filing with the SEC last Friday, Nikola said it issued 155,703 new shares that Tumim must purchase as Nikola asks over the next three years. The share sales effectively operate like a line of credit that Nikola can draw upon as needed.
There is no upper limit on the price of the shares, which Tumin would purchase at a 3% discount to the their market price at the time. Tumim is acting on behalf of the Murchinson Ltd. family office in Toronto and 3I, a general partner of Tumim in New York.
If Tumim purchased all the shares immediately, it would pay about $19.27 each compared to Nikola’s intraday Wednesday trading price of $15.70.
The company’s shares have been rising since May 24, reversing a 52-week low of $9.37 on April 21. Short interest — holders betting the share price will decline — accounted for about 32% of outstanding shares as of May 28..
No other debt
In exchange for Tumim’s commitment to effectively bankroll the company’s near-term needs, Nikola agreed to avoid taking on any other debt, such as a bank line of credit. Tumim agreed to avoid short selling its shares.
Nikola, which went public a year ago in a reverse merger with special purpose acquisition company (SPAC) VectoIQ, received about $700 million. Blank check investors purchased shares in a $200 million VectoIQ initial public offering in May 2018. Private investment in public equity funds like Fidelity brought in another $525 million.
SPACs are shell companies that exist solely to merge with a private company in order to bring it public.
Nikola’s cash needs are growing as it completes the first phase of a $600 million greenfield plant in Coolidge, Arizona, between Phoenix and Tucson. Nikola is also planning to build its first hydrogen fuel station for fuel cell trucks it plans to produce in 2023.
So far, Nikola has generated no meaningful revenue. It plans to build and sell 50 to 100 Nikola Tre battery-electric Class 8 daycabs in the fourth quarter. It has an order for a mix of battery-electric and fuel cell electric trucks from Total Transportation Services.