At first glance, the news seems to be negative. Nikola Motor has already stated it will settle with the US stock exchange regulatory agency, the SEC, for USD 125 million regarding the misdemeanors of its founder and former CEO, Trevor Milton. On the other hand, however, Nikola plans to claw back this money since Milton probably still owns at least a 10 percent stake in Nikola although he is likely to have sold some of his shares and transferred them to relatives. Nikola cannot simply seize these shares but perhaps it will freeze them until an agreement has been reached.
The SEC filing stating that Trevor Milton reportedly registered and sold shares worth USD 317 million in recent months (which also partly explains the recent price decrease) will not in my opinion prevent a settlement if part of this money flows back to Nikola, although that is only my theory – for which I accept no liability.
The free float, i.e., the number of freely tradable shares will therefore increase. This may give short sellers the right to short sell these shares which must number at least 60 million (as at November 2021), that is, about 30 percent of this free float. Critics like to object that the settlement with the SEC could give some the impetus to start a class action lawsuit as that could be seen as a sort of admission of guilt. Here, too, I will argue that a way to end this chapter will surely be found using the shares that Milton may still directly hold – although that is my own theory – for which I accept no liability.
Nikola itself is calmly implementing its business plan which can be seen in various collaborations and the expansion of the factory in Coolidge, Arizona. Together with TC Energy, a major Canadian gas pipeline corporation, Nikola is planning to produce in the region of 150 metric tons per day of green hydrogen. New orders were won for battery-electric and hydrogen-powered trucks and the latest filings revealed that the company’s headquarters in Phoenix, Arizona was meantime acquired for USD 25 million.
Apart from that, Nikola is preparing to further expand its service network and is behaving in a similar way to Daimler Truck which wants to bring online a network of 150 hydrogen refueling stations in Europe together with the French petroleum company Total. At the same time, German vehicle manufacturer Daimler Truck is planning 25 hydrogen refueling stations with the British petroleum company BP to solve the chicken-and-egg problem whereby no logistics company will order a fuel cell truck if it is unable to buy the fuel or it is not widely available.
Institutional investor Tumim Stone Capital, managed by 3i Management, promised Nikola up to USD 600 million through two financing programs and share-purchase agreements. Nikola can issue shares and place them with this major investor as it sees fit at the time and price of its choosing. I see this as a very smart move by this investor. Not only is it financing the implementation of the business plan but it is also succeeding in wielding an increasingly large influence over Nikola. I dare to forecast that this investor is ready with a lot more capital than the USD 600 million already announced to help Nikola to succeed and make the breakthrough. Tumim will ultimately – I suspect – hold a 15, 20, 25 percent or more stake in Nikola and, later, may pass on this large block of shares to a strategic investor with a lovely block markup. So, a perfect win-win situation – potentially.
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.
Written by Sven Jösting December 7, 2021