Though many would argue that Nikola shouldn’t be considered by investors, is there any reason to give them another chance?
Up more than 230% year-to-date and still considered a fraudulent company. Why wouldn’t an investor want a piece of the Nikola (NASDAQ: NKLA) pie?
Unless, that is, you actually know anything about Nikola and the year it has had. Allow me to remind those of you who may have missed this particular bit of 2020 goodness:
- June 4: Nikola goes public on the NASDAQ.
- August 5: Nikola reports its first-ever quarterly earnings as a public company, revealing just $36,000 in revenue, all from solar installations.
- September 8: Nikola announces a blockbuster deal with General Motors to partner up in vehicle production.
- September 10: Hindenburg Research publishes a short-seller report, accusing Nikola of “intricate fraud built on dozens of lies,” forcing Nikola to confirm that it does not even have a working truck yet.
- September 15: It is revealed that the SEC is investigating Nikola for defrauding investors.
- September 21: CEO and co-founder Trevor Milton steps down from his role amid SEC investigation.
- November 9: Nikola reports $0 revenue in its Q3 earnings.
- November 10: Nikola execs confirm that they have been subpoenaed by the Department of Justice.
This takes us roughly to today, where Nikola — currently undergoing an investigation into fraudulent practices without any product to sell — has seen its stock soar more than 17% overnight, despite its CEO’s failure to confirm that the GM deal is still a-go in a press conference yesterday.
Is GM a big deal for Nikola?
In short: yes!
The terms of the deal, as they stand, would see GM take 47.7 million shares of common stock, putting one of the world’s largest automakers in league with a potential Tesla disruptor. It would shore up faith in Nikola and keep them buoyed through GM’s own massive influence and backing.
However, in a statement by CEO Mark Russell last night, the new executive only said that discussions with GM about supplying fuel cell and battery technologies as well as an all-electric pickup are ongoing, but he wouldn’t comment much further than that. The big problem is that this deal should have been closed weeks ago, and as of December 3, either side could walk away from the table, leaving Nikola in a nasty spot as it deals with fraud, has less than $1 billion in the bank, and no sign of a product.
If that wasn’t enough to worry about, Nikola’s IPO lock-up period — typically a 90-180 day period during which time company shares cannot be sold by insiders — is coming to an end on Monday, November 30. Russell also failed to speculate about what ex-CEO Milton plans to do with the 91.6 million shares he owns. You can be assured that if he dumps these shares next week, Nikola investors will follow suit in droves, sending its stock tumbling.
Up 230%+ or not, Nikola Motors seems like a risk just not worth taking.
A MyWallSt subscription gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team post daily insights, subscriber-only podcasts and the headlines that move the market. Get your free trial now!
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.