Nikola Corp. (ticker: NKLA), an American company dubbed as the “Tesla of trucking”, has announced several concept zero-emissions vehicles since 2016 and has indicated plans to produce some of them in the future. Nikola didn't have a traditional IPO. It was purchased by a SPAC (special-purpose-acquisition company) called VectorIQ.
Nikola Corp. through a reverse merger went public on the NASDAQ on June 4, 2020, when it hit a thumping $93.99. Ever-since it has lost 80% of its value, closing on Friday (30th October) at $19.46, which was quite a drop.
The NKLA stock price has been falling drastically since the step-down of the ex-CEO Trevor Milton because of an advertisement scandal and Nikola was further accused by a short-seller of having misled investors and is now being investigated by the SEC (Securities and Exchange Commission). Steve Kalayjian, the co-founder of Ticker Tocker believes the share price could further lose almost 70% of its value and crash to as low as $5.
Mark Russel, CEO of Nikola Corp., claims the Badger (a fully-electric and hydrogen fuel cell electric pickup truck) to be an exciting and interesting project, which has also fascinated many shareholders but left the institutional shareholders focused mostly on the business plan. However, the 16% fall in share price (shown in the chart below) during October has downplayed the Badger truck plans.
Source: The Motley Fool
Nikola has been in talks with GM (General Motors) for a strategic partnership for an 11% stake, which is likely to close on 3rd December. This deal is crucial for Nikola in-order to build a network of hydrogen re-fueling (filling vehicles with zero emission fuels avoiding pollution) that could aid the company with rolling out hydrogen-powered trucks. This deal with GM is very crucial for NKLA as it will help them cut over $5 billion in costs over the next decade. However, this partnership is now in a grey area. In response to the investors, comments made by Mark Russell mid-month that his company's success doesn’t depend on General Motors did little to quell investor concerns.
With Nikola shares currently trading at almost 50% of what the original agree price was, GM wishes to reprice the deal at a lower level. General Motors in a statement said: "Our transaction with Nikola has not closed. We are in discussions with current Nikola management and will provide further updates when appropriate or required." This statement has left shareholders confused about the deal, which caused a plunge in share prices.
Investors on Wall Street definitely have a herd mentality, which is evident by them fleeing-off during the market dip causing Nikola's share value to fall 16 per cent on Friday (30th October) as investors were stressed that General Motors may rule against taking a stake in the truck start-up. Nikola suffering credibility doubts on Wall Street further led to a decline in the share price by around 3% on Thursday (12th November) as in the recent earnings release – Nikola reported a net loss of 31 cents a share and having $918m in cash. Thus, only closing the partnership deal with General Motors can save Nikola’s share prices from plunging.