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Nikola Motors: Capital increase at the right time

Nikola Motors: Capital increase at the right time

Short sellers are working massively against the company at the stock exchange. There were shortly even nearly 200 million shares sold short (on Nov. 16 still 193 million). But now, a price change upwards seems very likely. The reason could lie in the comments made at the press conference on the third quarter results, which Nikola – in my words – sees as being on the right track. The company amassed about 250 million USD in liquidity in the third quarter, and now has available 705 million USD in capital access.

The damage due to recalled battery-electric trucks was reported as 61.8 million USD (warranty reserve), where Nikola not only resolved this problem, but employed batteries from a still unnamed supplier that possessed advantages over the previous model, was the comment from the company. Additionally, the truck will be equipped with more features that will give the driver more options during use, for example from a distance using a smartphone app, the truck could be already prepared with heating in the winter and air conditioning in the summer, before the driver gets in. The battery-electric truck will, after the retrofitting in the first quarter, again find its way to customers.

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Now orders can come

There are 277 letters of intent for the purchase of the hydrogen-powered truck. In the fourth quarter, 30 to 50 of them are to be delivered and between 11 and 19 million USD turnover generated. With the battery-electric truck, meanwhile – despite the recall – an individual order of 47 units will be gained. In the next two years, Nikola is determined to deliver on average 250 to 300 trucks of both types per quarter.

The cash burn is at 100 million USD in the quarter, where for the current quarter, the financial effects of the recall on the battery-electric truck are still to be felt (61.8 million USD, of which about 38 million USD is capital that will be used). And the better the scaling of the truck production goes, the more cost-effective they can be manufactured, in order to at the end of the day come out with a good profit margin. Consider this: Money is the future will be earned especially with electricity and hydrogen and not with e-trucks per se. Nikola is at the start of its (success) story.

California setting the pace

Nikola is concentrating, for good reason, on the US state California. Firstly, the best subsidies (up to around 408,000 USD per truck) are there; secondly, the time pressure for shippers to replace diesel-powered by CO2-free trucks is very high. Already starting 2024, in California only the last-mentioned will be allowed at port facilities, so there will be new registrations only for battery-electric or hydrogen trucks. We’re talking about over 30,000 trucks alone in this market segment – a winning pass for Nikola Motors, since in the Inflation Reduction Act are provided also 2.6 billion USD in subsidies specially for port facilities and also drayage trucks as well as for the H2 infrastructure.

Additionally, the competition for Nikola in this truck segment will be sparse for years to come. The look at the already approved vouchers for e-trucks is cause to celebrate: 96 percent of the vouchers of the California’s HVIP program for hydrogen-powered trucks and 50 percent of the vouchers for battery-electric trucks are attributable to Nikola. After all, Nikola is to have received approval of already over 400 vouchers for the two truck variants. A respectable success.

Lawsuit against Milton won

The lengthy legal dispute with company founder Trevor Milton was won. On October 20 came the decision. Milton must now pay 165 million USD to Nikola, which includes procedural costs Nikola first had to pay and now receives back. It should be noted here that there is still no indication of when the money will flow. Nikola still has to pay a portion to the SEC itself, as they reached a settlement of 125 million USD and must itself fulfill it. If 165 million USD flows from Milton soon, Nikola’s liquidity will rise, as the SEC payments will be divided over the next years.

Goals ambitious but realistic

Currently, Nikola can produce 2,400 trucks of either variant per year. In order to be profitable, sales of 1,000 trucks in 2024 and 1,500 in 2025 are needed. These targets are considered realistic from the company’s perspective, if Nikola delivers 250 to 300 truck per quarter. In my view, there will also be some large orders. Beyond this, declarations like the letter of intent (LoI) with Anheuser-Busch (800 trucks) will also flow into the orders on hand, is my expectation.

Nikola Motors – The Tesla of trucks?

For this hypothesis, I earned a lot of criticism. One cannot compare a startup like Nikola, though, with the success story of Tesla. One can say: Tesla started small, then came Elon Musk. The company reported heavy losses for many years and was even on the verge of bankruptcy before the breakthrough came. In the first three years, Tesla earned money, but not with the e-cars but with  emission rights that could be sold to other car manufacturers. Tesla solved the chicken-and-egg problem by providing the electricity for the battery-electric vehicles itself by establishing a charging network made of its own Supercharger stations. Who would have bought a car from Tesla if there had been no charging option – as a package, even free of charge for years?

Nikola is doing the same – only for trucks with the help of electric charging stations and H2 refueling stations. Nikola wants to earn money with electricity and the self-produced or purchased hydrogen. In the USA are waving high subsidies of three USD per kg. Tesla continues to address the market for e-cars, but Nikola the segment for trucks. Both companies can be considered disruptive – they change markets and business models. Both are first movers.

Tesla and its CEO was met with much skepticism, but they proved that change is possible. Nikola is doing the same – only for commercial vehicles. Whether both can be compared with regard to the development of their valuation or share prices time will tell. For Nikola I am extremely optimistic.

Chief financial officer leaves the company

Stasy Pasterick was just six months in office as CFO. She is going over to Universal Hydrogen in the same capacity. It will be interesting to see who her successor will be.

Capital increase secures the company

On December 6, 2023, Nikola’s plan to raise fresh capital on the stock market became known. It entails a convertible bond of a nominal 175 million USD with 8.25-percent coupon (green bonds) with maturity December 2026 (0.90 USD conversion price per share) and 100 million USD in new shares at 0.75 USD per share. The share price fell from around 1 USD probably because – no guarantee – a hedging took place, so the price was depressed, as one can retain and stock up on the share after the capital raise. The share also fell because short sellers wanted to use the capital increase as a negative for themselves.

In accordance with experience, this measure will have already been successfully implemented by the time you read these lines. With it, Nikola is then thoroughly financed and will ultimately have 500 million USD in the bank. That the share price is rising above 1 USD again is also in the nature of things, because the financiers (investment banks such as Nomura) will most likely not accept a delisting of the share (it will come to this if the price sinks below 1 USD for a longer time).

Summary: Nikola is well on the way to positioning itself as a first mover in CO2-free trucks in the USA – first in California, later across the whole country and in parallel in Canada, where likewise large subsidy sums up to 380,000 CAD per truck are waving. Comprehensive funding programs are acting as a turbo, as the buyers of the trucks can comply with the regulatory pressure and are financially incentivized as well. The H2 infrastructure is being established by the company itself, but will be financially accompanied by business partners such as Voltera (EQT) and is receiving a boost by a 7-billion-USD program of the Biden administration, in which seven hydrogen hubs are to be established in the USA. The stock market will not be able to avoid newly valuing Nikola as a startup: In the right market at the right time. Maybe Nikola will even be the H2 share that develops the most price potential. What’s the phrase? No risk, no fun.

Nikola’s management team is considered excellent. CEO Stephen Girsky pointed out that this includes top managers who no longer actually have to work in a start-up, but who are happy to contribute their expertise to make the company’s vision a reality. This is the right approach – out of conviction and with experience.

Disclaimer

Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.

Déjà vu in Stuttgart

Déjà vu in Stuttgart

For all those who have been active a little longer in the hydrogen and fuel cell industry, it will be like déjà vu when they arrive at f-cell on October 4th, 2022. They will be walking from the S-Bahn station or airport to the Stuttgart fairgrounds, and not, as in previous years, to the Haus der Wirtschaft. And this very move – from the Stuttgart city center to the airport – has already been made once before, in 2008. At that time, however, still under the direction of Peter Sauber. (more…)

Peter Sauber says farewell after over 20 years

Peter Sauber says farewell after over 20 years

Peter Sauber with Stefan Kaumann

Peter Sauber (left) with Stefan Kaufmann, national innovation officer for green hydrogen

Peter Sauber filled the fairgrounds of the Haus der Wirtschaft in Stuttgart with exhibitors one last time. To conclude his long career, the fuel cell pioneer presented, with the customary professionalism, an f-cell as eventful as in the best days, despite pandemic conditions. All of the available exhibition spaces were booked and it would have been even grander if the area were larger, remarked Sauber, showing H2-international the waiting list as proof. (more…)

Hurray for hydrogen!

Hurray for hydrogen!

Hybrid event marks f-cell’s 20th anniversary

Trade shows and conferences

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Fig. 1: Attending his last f-cell award ceremony as state environment minister, Franz Untersteller said: “Everyone wants a piece of the hydrogen pie.”
“Everyone wants a piece of the hydrogen pie.”

In 2001, Peter Sauber Messen und Kongresse event management kicked off the f-cell show in Stuttgart, Germany. Since that first, intimate get-together, featuring a small exposition, f-cell has become a hydrogen and fuel cell magnet. In September 2020, f-cell celebrated its 20th anniversary with a hybrid event featuring online and offline sessions. Many attendees thought the in-person meetings at Stuttgart’s Haus der Wirtschaft a blessing, happy and relieved to exchange ideas and phone numbers face to face once more.

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Silke Frank launches Mission Hydrogen

Silke Frank launches Mission Hydrogen

Silke Frank

Early this year, Silke Frank, the longtime face of the f-cell trade show, left event organizer Peter Sauber Agentur Messen und Kongresse and went on to found Mission Hydrogen in nearby Winnenden on March 1. She had been with Peter Sauber Agentur since 2003 and worked her way up the ladder to become owner and founder Peter Sauber’s right-hand woman who oversaw day-to-day operations at the company. In that time, she had, for many years, a decisive influence on how the f-cell show held in Stuttgart was run.

(more…)