Nikola Motors – Hefty price drop after profit-taking

Nikola Two
Nikola Two Truck, © Nikola

A temporary jump in Nikola’s market cap to over USD 25 billion and a stock price topping USD 70 – on one day, even USD 90 – were quite the start. And yet, I stayed on the sidelines, which turned out to be the right thing to do.

Sales, likely by original shareholders, and the registration of over 30 million shares for eventual placement have brought the price down to around USD 30 in the meantime. Nevertheless, the shares quickly rebounded, rising to more than USD 40, as news broke that Republic Services, the United States’ second-largest solid waste collection provider, ordered as many as 2,500 battery-electric trash trucks, to which it could add another 2,500 later (see p. 38).

I believe Nikola [Nasdaq: NKLA] shares are a buy in the range of USD 30 to USD 40. Bookings of more than USD 10 billion are an impressive feat. Still, I would have wished that those who owned stock right from the start would have been subject to a lockup agreement lasting two to five years. Now, it may look like some people were or still are only interested in making a quick buck, a move that generates no extra cash for the business but merely lines the pockets of early stockholders.

While multiple battery-powered Tre trucks will reportedly leave the factory in the first quarter of 2021, the first hydrogen-powered Nikola Two vehicles will be delivered to major customer Anheuser Busch late next year.

read more in H2-international October 2020

Risk warning
Share trading can result in a total loss of your investment. Consider spreading the risk as a sensible precaution. The fuel cell companies mentioned in this article are small- and mid-cap businesses, which means their stocks may experience high volatility. The information in this article is based on publicly available sources, and the views and opinions expressed herein are those of the author only. They are not to be taken as a suggestion of what stocks to buy or sell and come without any explicit or implicit guarantee or warranty. The author focuses on mid-term and long-term prospects, not short-term gains, and may own shares in the company or the companies being analyzed.

Author: Sven Jösting, written September 1st, 2020

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