Nikola Corp. filed a $100 million public offering of company stock, pricing it below its record-low share price recorded in after-hours trading Thursday.
Nikola said it would sell 29,910,715 shares of common stock to the public at $1.12 per share. Company shares traded at $1.30 in extended-hours trading after markets officially closed. Nikola plans to sell 59,374,999 shares of common stock to a private investor in a direct offering.
Adding about 94 million shares to the approximately 513 million outstanding shares creates significant dilution for current holders.
Buyers warned of immediate dilution
In the “risk factors” section of a Securities and Exchange Commission filing Thursday, Nikola warned that purchasers would experience immediate dilution. And if Nikola borrows additional money, lenders likely would have priority in being repaid over shareholders.
Based on Monday’s closing price of $1.50 a share, Nikola’s $522 million book value would have made the new shares worth just 90 cents each. Given the lower trading price Thursday, the amount of dilution was unclear.
Traders began cashing out shares in the electric truck and hydrogen fuel startup when Nikola announced the public offering after the market closed. The company priced the offer late Thursday evening. Nikola trades on the Nasdaq under the symbol NKLA.
Nikola starved for operating cash
Starved for cash, Nikola plans to produce hydrogen-powered fuel cell electric trucks (FCEVs) for sale in the fourth quarter. The company said Wednesday it has orders for the first 100 zero-emission Tre FCEVs, which cost up to $750,000 each before incentives.
Nikola alerted the SEC to the public offering on Tuesday when the company listed just under 250 million shares for sale. In its news release announcing the offering, Nikola said bankers at Citigroup, its underwriter, could sell up to $15 million in additional shares. That would be about 4.5 million additional shares if the offering sells out.
The company entered a separate $400 million at-the-market arrangement with Citigroup in August allowing it to directly sell shares at market price. Earlier in August, after three tries, Nikola got enough votes to increase its number of authorized shares to 800 million from 600 million.
Founder Trevor Milton, the company’s largest shareholder, voted against the measure because of the potential dilution. He faces sentencing June 27 on three fraud convictions following a federal trial in New York last fall.
Nikola plans to ask for another increase in authorized shares
Nikola plans to again ask shareholders at its annual meeting in June to raise the number of authorized shares. Given last year’s experience, which required hiring a proxy solicitation firm to chase down shareholders who withheld their votes, the company is wary of a repeat of last year.
“Having additional authorized shares of common stock available is critical to our continued efforts to pursue our strategic goals and we will be limited by the number of shares available for future capital raising transactions,” the company said in the SEC filing.
“A delay in securing, or a failure to secure, stockholder approval to amend our restated certificate of incorporation could cause a delay in our future capital raising … and would have a material adverse effect on our business, prospects, operations, liquidity and financial condition.”
Nikola filed a notice of going concern with the SEC as part of its year-end 2022 required filing. Company auditors said that despite having three measures in place to sell stock for operating cash, Nikola could not count on the equity arrangements. The company had $323 million in cash at the end of 2022.
Chief Financial Officer Kim Brady, who announced his retirement on Monday, dismissed the notice of going concern as “accounting language” in a Feb. 26 interview with FreightWaves.
Editor’s note: Rewrites throughout with offering pricing and comments from SEC filings.