Nikola Stock

Nikola Stock

Nikola Stock : Nikola Corporation is a startup company based in Arizona that specializes in electric and hydrogen-powered vehicles.

Founded by Trevor Milton in 2014, the company has already gone through a rollercoaster with virtually everything that could go wrong, going wrong.

Even though there was some hope that Nikola was somehow heading in the right direction, those hopes quickly evaporated when Mark Russell, the current CEO of Nikola, replaced Milton last September. 

In March 2020, Nikola announced its IPO plan through a proposed special purpose acquisition company (SPAC) reverse merger with VectoIQ, a deal that closed in June of 2020.

From that, Nikola’s stock experienced a trading frenzy. From March to June 2020, the stock surged over 500% and peaked at $94/share from the reverse merger and all of the good news involving the Badger, Nikola’s highly anticipated electric pickup truck.

 However, as of April 6th’s close, its share price sits at $13.30, or a jaw-dropping 86% from its 52-week high. All the good things that were supposedly happening for Nikola eventually did not happen. In this article, we will discuss reasons why you should stay away from Nikola. 

Source: Yahoo Finance

1. Nikola’s Lack of Profitability 

Nikola is not generating any revenue because  they are not selling any products. Nikola is considered a pre-revenue startup but claims to be profitable in the future. When Nikola closed the SPAC reverse merger last June, their CFO Kim Brady projected revenue of $150 million in 2021 and projected revenue of over $3 billion in 2024.

In 2020, Nikola reported revenue of $0.1 million, with a majority of revenue coming from solar installation for Milton himself. This is lower than the reported revenue of $0.5 million in 2019. At this rate, it is highly doubtful that Nikola will report revenue nowhere near the amounts that Nikola’s CFO projected. Nikola’s lack of profitability is already known to its investors.

Milton, the founder and former CEO, even touted last June in a CNBC interview that neither he nor his investors care about their lack of profitability. Milton did another interview on CNBC in August to discuss Nikola’s dreadful 2020 Q2 earnings report which saw revenue of only $36,000. During this interview, Milton attempted to restore investor confidence by asking investors to “give us time”, saying that “we are no Tesla and will not provide the same returns like Tesla”. Additionally, he said that “the next four months are going to be the greatest four months in Nikola’s history ever.” If anything, those four months were the worst in Nikola’s history. 

2. Milton & Insider Stock Sales 

Another red flag for Nikola is the continuous sale by insiders, especially by the founder himself. Just this past Monday, it was reported that Milton sold roughly 3.5 million shares of Nikola stock for $49 million. These actions have led to a lack of confidence from investors. Nonetheless, he is still Nikola’s largest shareholder with 79 million shares with a current value of approximately $1.1 billion. His last stock sale was in December when he sold 3.34 million shares out of the 91.6 million he could have sold due to the expiration of an insider lockup period. Additionally, other insiders had the opportunity to sell 70 million shares collectively during that insider lockup period. 

3. Failed Deal with General Motors 

Last September, General Motors (GM) and Nikola announced a partnership in which Nikola would be able to use GM’s battery system and fuel cell technology to build their vehicles. In exchange, GM would receive an 11% equity stake in Nikola and build the highly anticipated Nikola Badger for them. This potential deal, expected to close later that month, seemed like it would be a gamechanger for Nikola.

However, two days after the partnership was announced, short-seller Hindenburg Research published a 67-page scathing report attacking Nikola. Hindenburg alleged that Milton misrepresented investors about Nikola through lies and fabrication about its products. Days after Hindenburg’s attack, Milton came out with his statement denying the allegations. Milton eventually resigned as CEO of Nikola approximately one week before the anticipated closing date of the deal and deleted his Twitter account, which had tweets containing many claims that weren’t true. 

With days left until the anticipated closing date, GM felt less confident about the deal  Eventually, by the end of November, GM announced that the deal was off and that the Badger would no longer be manufactured by them. However, a smaller deal was approved,making GM a customer rather than a partner. This amended deal allowed the two companies to work together to incorporate GM’s fuel cell technology into Nikola’s Class 7 and Class 8 zero-emission semi trucks. 

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With prior reports, there is very little reason to believe that this startup will ever be profitable in the future. In addition, Nikola has deceived investors thanks to Milton’s false claims, making them a company to avoid. Although Milton no longer runs Nikola, the damage has likely been done. There are far better electric vehicle stocks that are either profitable or have the potential to be profitable in the future.

Nikola founder Trevor Milton accused of sexual abuse by two women 

Nikola Stock