Green Nikola Holdings plans to cut its ownership stake in Nikola Corp. (NASDAQ: NKLA) by 50%. The subsidiary of South Korean solar panel maker Hanwha Group is the second major partner to reduce its holdings in the troubled electric truck startup.
The action follows Nikola’s filing on Monday to sell $100 million in new shares. The additional shares would dilute the value of shares currently held.
The Hanwha affiliate said it still believes in Nikola’s plans for zero-emissions trucking by battery electric or fuel cell tractors.
“As a strategic partner, Green Nikola Holdings continues to have confidence in Nikola’s vision and maintains a significant position in Nikola’s shares,” Hanwha said in a statement.
Hanwha plans to sell more than 11 million of its 22.1 million shares. That would drop its ownership from 5.6% to 2.8%, according to a Securities and Exchange Commission (SEC) filing on Wednesday.
In December, fuel cell systems maker Robert Bosch LLC sold 4.26 million of its 18.82 million shares. That cut its stake from 6.4% to 4.9%.
Both Hanwha and Bosch invested in Nikola before it became a public company in June 2020 via a reverse merger with special purpose acquisition company (SPAC) VectoIQ.
“Hanwha remains an important strategic partner and continues to play an active role on Nikola’s board of directors,” Nikola said in a statement.
A third partner integral to Nikola, CNH Industrial N.V. (NYSE: CNHI), led Nikola’s Series D investment round in September 2019. CNHI invested $100 million in cash and $150 million in a manufacturing joint venture between its Iveco subsidiary and Nikola.
Nikola is producing prototypes of its battery electric Tre cabover model based on Iveco’s S-Way platform at a plant in Ulm, Germany. The S-Way also will underpin Nikola’s hydrogen fuel cell-powered Two model in 2023.
CNHI holds 7.5% of Nikola shares. The conglomerate is in talks to sell Iveco to Chinese state-owned First Automobile Works (FAW). What would happen to the Iveco-Nikola joint venture is unclear should Iveco become part of FAW. Nikola CEO Mark Russell declined comment during a recent FreightWaves interview. CNHI did not respond to a request for comment.
New shares registered
Nikola filed an S-1 form on Monday with the SEC to sell an undetermined number of new shares sometime in the future. The dilution of the new shares could have influenced Hanwha’s decision to trim its stake.
Nikola’s share price has been volatile since a short seller’s report last September alleged fraudulent statements by Nikola about its technology. Shares traded at $15.09, down 7.93% on Thursday.
Stock sale proceeds would be used to help pay for a $600 million assembly plant under construction in Coolidge, Arizona, and for other corporate purposes.
“[It is] highly likely that we will be raising money this year,” Russell told FreightWaves. “And I think we were clear about that last year. Even as we were going public, we said that we will probably need to raise money sometime in the next year or two.”
Even in a favorable, low-interest borrowing environment, Nikola has to rely on selling equity because it has no revenue or profits, which banks would lend against.