My recommendation to use the temporarily very weak prices in Cummins for continued and new buys has already paid off: The share price grew from around 200 to over 255 USD. And it will continue to, even though Cummins is increasingly focusing on new markets like hydrogen (engines, electrolysis, stacks for commercial vehicles, etc. – we reported).
Cummins can finance its own growth well from its own means through corporate earnings. On average, 34 percent of corporate profits are distributed to shareholders as dividends – in 2022, it was 6.28 USD per share. This was topped up by seven percent on July 11 to 1.68 USD per share for the quarter. The company’s growth rate of 26 percent per year on average over the past five years is solid. Cummins now sees turnover in the current fiscal year at 33 billion USD and expects an earnings per share of 19.80 USD, which corresponds to a growth of 31 percent. A good justification for further rising prices.
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Share price decline despite good figures
Cummins reports for the second quarter a turnover of 8.6 billion USD (plus of 31 percent) and profit of 720 million USD, which came out lower than expected, however, and allowed the share price to sink from over 255 USD to 230 USD – thus already back to buy level, as the guidelines are unchanged.
Together with Air Liquide, Cummins Engine acquired Canadian company Hydrogenics in 2019 for 290 million USD. In the transaction, Air Liquide retained at that time a 19 percent share in the company. This share Air Liquide has now sold to Cummins for the equivalent of about 156.5 million USD, making the value of Hydrogenics as per today the equivalent of over 823.7 million USD. Cummins plans with subsidiary Accelera, in which Hydrogenics is consolidated, to build an annual electrolysis capacity of 3.5 GW in the next years. A diversity of large orders – 500 MW in China, 500 MW in the USA, 500 MW in Spain and 1 GW in Belgium – are already in the books of Cummins or Accelera.
Considering that Plug Power intends to build 5 GW of electrolysis capacity within a few years and is currently valued on the stock exchange with a good 6 billion USD, Cummins should consider placing its subsidiary on the stock exchange, possibly while also retaining a majority shareholding, like Thyssenkrupp did with Nucera. The consequence in this purely theoretical consideration: Capital inflow of over 2 billion USD, with which, on the one hand, the price for buying Hydrogenics is covered (flows back in); in addition, an extraordinary profit beckons; and thirdly, Accelera via the stock exchange would receive new growth capital (for acquisitions?) – just as a thought experiment.
Hydrogen-powered engines
The automotive expert journal WardsAuto reports on how advanced Cummins is in its work to bring engines to market that run on hydrogen. There is to be a new version of the successful B6.7 diesel engine that with its powertrain burns hydrogen and can be used in heavy trucks. After all, there are already restrictions in place in California that prohibit already starting 2024 the operation of diesel trucks on, among other places, port grounds. Vehicles produced before 2010 will soon no longer be allowed on the roads of this state. A winning pass to all manufacturers of alternative drives – so employment of the fuel cell or direct injection of hydrogen as well as battery-electric systems.
With this, the new B6.7H 6.7-liter hydrogen engine (range of 483 km, or 300 mi) can quickly become a slam dunk if hydrogen and the corresponding infrastructure are available. So it is very suitable that the US government via the Inflation Reduction Act has provided 8 billion USD for the construction of six to ten H2 terminals distributed across the US – in addition to the many individual programs offered by states such as California.
Summary: Cummins Engine is working on a variety of platforms for the use of hydrogen in many applications such as heavy transport and rail but also for electrolysis, whether PEM or alkaline. The stock market will increasingly let this show in the company valuations. A real H2/FC blue chip is what Cummins has developed into.
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.
The press conference for the second quarter delivered a number of results that allow a very optimistic outlook for the future of the company. Ballard is positioning itself perfectly in its most important markets: buses and trucks, rail vehicles, maritime transport and stationary energy. This involves optimizing the production processes of all important components, cost reductions (scaling), local-for-local strategies (supply chains in the specific countries where Ballard maintains production) and ramp-up in the various regions of the world in which the company operates. A few examples:
In buses, the Canadian company is ahead of the pack in the fuel cell segment with a formidable market share of still over 70 percent. Recently, the largest single global order came in from customer Solaris for 96 FC buses (52 of them for public transport company Rebus in Güstrow near Rostock). In the next two years, it’ll be an astounding 10,000 FC buses (Europe and USA), a large share of which is sure to be Ballard. The USA is just beginning to pick up speed in this regard, and Ballard sees itself well placed to accept larger orders from, among other, New Flyer (have market share of about 66 percent in transit buses). Individual orders from municipalities have now grown from units of 1, 2, 5 to 100 FC buses.
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The China card
In China, a lot is finally happening at the government level regarding hydrogen (see above). The chance of a comprehensive funding program starting in 2024/25 is increasing. Will China do it in dribs and drabs or, similar to the US government with the Inflation Reduction Act, launch a mammoth hydrogen program (investment incentives, subsidies for H2 production)? China could use hydrogen as a climate-friendly economic stimulus package for itself, given the current problems in the construction sector and with the infrastructure programs. In addition, new markets within electric transport can be established that could supplement or alternatively replace battery-electric ones, which would deliver a turbo boost to the world market for fuel cells.
For Ballard and its joint venture with Weichai (49:51), this allows a lot of possibility. CEO Randy MacEwen said: “We are believers in the long-term market opportunity for China. It is the largest market for production and use of hydrogen today and based on my recent visits there, I expect that to continue through 2030 – 2050. There is an enormous level of activity.”
Wisdom Motor sends 147 FC trucks to Australia
With Wisdom Motor – headquarters in province Fujian in China –Ballard has already started a strategic partnership in May 2022, which also includes the companies Templewater Group and Bravo Transportation (trucks and buses). Wisdom Motor in turn signed a cooperation agreement (MoU) with the Australian companies Pure Hydrogen and HDrive in November 2022, where Wisdom would supply over a five-year period 12,000 heavy-duty hydrogen-powered trucks (among them rubbish trucks).
Now, the first order has been completed, which entailed the delivery of 147 hydrogen-powered trash collection vehicles. Order value: 63 million USD. Supplier of the modules/stacks: The joint venture of Ballard and Weichai in China – exclusive even. Could this already mean that Ballard via the China JV is now supplying 2,400 FC modules per year here from this deal alone? The FC capacities of the JV currently correspond to 20,000 units per year, so this order is a very good start looking at the future.
Investments in China will be adjusted
Originally, Ballard wanted to establish its own MEA production with an investment volume of 130 million USD in China, among other things to counter import tariffs. This investment will be postponed for now, until there is clarity on the subsidy program. They are sticking to the plans, but don’t want to invest in land and all that until the FC market gets going there. However, they have concerning the supply chain all of the important connections already and can quickly act at the opportune time. To put it another way, this allows the interpretation that Ballard is first investing more in markets (USA, Europe) where the company expects to have better chances of winning orders in the near future. All this can also quickly be modified, however, if China accelerates its hydrogen strategy through subsidies and incentives.
Platform partnerships as a turbo
Ballard has been working for a long time on building so-called platform partnerships. This refers to customers who know how to use the fuel cell know-how (stacks & modules) for their own benefit and integrate this into their own hydrogen strategy, and acquire the FC modules exclusively from Ballard. They fully rely on Ballard in this regard and the company’s experience as well as the quality of its FC products. For Ballard, this means being able to deliver large quantities of modules/stacks to these partners in the future. In the bus sector, these are companies like Van Hool or Solaris, and with rail vehicles, Siemens Mobility and Stadler, to name a few examples. There could probably become 30 or more such partnerships, which means enormous and, above all, secure sales potential in the medium to long term.
Selection procedure of Ford speaks for Ballard
Ford Truck has decided, after comprehensive market analysis, to employ Ballard FC modules for its trucks of the F-MAX series. Two 120-kW FCmove XD modules be employed per truck. First, a letter of intent (LoI) was signed and the delivery of some modules for test purposes agreed on. From this will then come a large series. You can compare this with Bosch and Nikola, where Bosch supplies the FC modules.
This is an accolade for Ballard that underlines its expertise. Ford Truck builds, in addition to heavy trucks, many other vehicles such as construction vehicles and tractors that could in the future have Ballard inside. The truck production in Turkey is to be the first Ford site for this. Over 10,000 vehicles roll off the assembly line here every year.
Ford can itself install the Ballard modules perfectly on its own truck chassis, is the plan. It will surely take another year or two until, after test runs, the first large orders are given over to Ballard. The foundation, however, has now been laid. What would happen if Ballard were to supply 1,000, 5,000, 10,000 or more FC modules in a year – alone for this one platform partnership? According to Ballard: “As Ford’s fuel cell F-MAX truck platform matures, we anticipate this partnership to evolve into a long-term scaled-deployment-level module orders and supply arrangement.”
Canadian Pacific (CPKC) too has ordered for its production facility in Kansas City 20 FC modules for use in various locomotive types in order to gain experience from the test operation. They are also working together with railroad company CSX to make locomotives H2-ready or break away from diesel operation. A very large order can come out of this. Further orders are expected further in the course of 2023.
Figures
The reported loss for Ballard lay, as expected, at minus 0.10 USD per share for the quarter. The order volume rose strongly in terms of value to 147.5 million USD and will continue to do so. In the bank still lies a good 815 million USD in liquid assets. The ratio of sales development between the first and second half of the year is described as 30:70 percent, so the current second half of the year promises positive surprises regarding this. Really exciting will then be 2024/25.
Summary: The calm in the share price development of Ballard should end in 2024 at the latest and lead to a gradual rise in the share price that finds its foundations in the rising number of orders for the FC products in all the various platform partnerships, markets and regions. A turbo could be China, when clarity on subsidization is created. Therefore: Buy and leave alone. No hasty reactions. Think about Facebook, Amazon and Google in the first years: There were only “logical” huge losses – until the business models started to soar – the shares as well.
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.
Bloom Energy was able to increase its turnover by 24 percent in the second quarter to over 301 million USD. The right growth, meanwhile, is to take place – as in every year contingent on project completions – again in the second half of the year – principally in the fourth quarter. The ratio is assumed to be 30:70, so 70 percent of sales – with increasing trend – will wind up in the second semester.
The expectation of delivering in the fiscal year a total turnover of 1.4 to 1.5 billion USD has been validated. The non-GAAP profit margin is to come out to 25 percent for the whole year. The cash on hand was able to be raised as per June 30, 2023 to an astounding 923 million USD. This includes net proceeds from a convertible bond in the amount of 560 million USD.
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New business model: Series 10
For industrial customers requiring at least 10 MW of energy output, Bloom offers to make this scalable to purchase via electricity and heat supply contracts – term of at least five years –– without having to themselves invest in technology/hardware. The customer receives energy at a fixed calculable price and that reliably 24/7. For this, Bloom can continue to employ natural gas but also biogas and hydrogen, depending on availability. In addition, Bloom is determined to use waste heat – for example at data centers – wisely. Consider that data centers in particular require a lot of energy for cooling the servers, but at the same time the resulting waste heat (process heat) is also useful. Specifically:
The customer receives a secure supply of energy at a fixed price over an extended period of time. Up to 0.099 per kWh at the lower end.
If there is a need for more energy, the system can be expanded to the requested amount through further delivery of additional Energy Servers within 50 days after the signing of the contract.
No upfront investment required. Bloom provides the Energy Servers and infrastructure for the customer at no additional cost.
Installation, service (maintenance) and management of the Servers is carried out by Bloom Energy.
The systems are designed so that they can run on natural gas, biogas and hydrogen – according to customer requirement and availability. Also the switch from one energy source to another is no problem.
The energy can be requested directly by the customer, but also alternatively through a provider that supplies the customer with energy according to need. Bloom cooperates with energy suppliers of all kinds for this.
Heating
More than 50 percent of the energy used in the business realm is process heat. This area is one of the most important in terms of decarbonization. Rising energy prices are an additional challenge. On the other hand, the increasing digitalization is leading to higher power requirements for data centers and associated networks. Up to 40 percent of the energy required there is used to cool the systems. That energy is primarily electricity. This is also the case with air conditioning and appliances for cooling or freezing. Hydrofluorocarbons (HFCs) are employed in these, which are very destructive to the climate – 100 times more damaging than CO2.
Here, Bloom can make a start by employing CHP (combined heat-and-power), as the Energy Servers give off a large amount of heat. From this point of view, the heat is a perfect usable waste product, which can be used by the industrial customer for its process heat. The waste heat can equally be used in return for air conditioning and chilling/freezing. At the end of the day, all this is achieved without the use of HFCs.
All this saves money and reduces CO2 emissions as well as energy requirements. This is already being utilized in Europe, but now with the Inflation Reduction Act, the USA is on track to use this potential for itself. Bloom is in talks with many potential industrial customers on the subject.
Summary: You can bet on the fourth quarter of this year already today. It must be, based on the forecasts, overall very positive in terms of a) the profit margin and b) expected turnover: 400 to 500 million USD. The third quarter is expected to remain at the level of the second quarter and so not offer any surprises. Further speculation should focus on the introduction of high-temperature electrolyzers in 2024, as a further boost to sales and order volume could derive from this.
Bloom is still experiencing losses but will enter the profit zone in 2024/25 – and with high sustainable growth, is my expectation. Furthermore, the topic of hydrogen (production, application, tax incentives via Inflation Reduction Act) will have increasing importance for Bloom. The stock market will have no choice but to show the long-term prospects in its valuation. Bloom seems to me to be very well positioned in the field of energy and hydrogen. Target: More than 50 USD in two years. Collect and leave alone. The stock market anticipates all this.
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.
Plug Power reports on a variety of projects related to hydrogen, its production, use and future markets in which it is active and feels it is a frontrunner. Company representatives talk about an H2 production facility in Georgia that is the largest of its kind in the USA. They’re active everywhere – in stacks, cryotechnologies (liquefaction), electrolyzers and hydrogen-powered vehicles.
The figures, though, speak a completely different language: Turnover indeed grew by a remarkable 70 percent to over 260 million USD in the second quarter. But the quarterly loss likewise increased 58 percent to minus 236.4 million USD, or 0.40 USD per share (minus 0.26 USD per share was the expectation for the Q2). Liquidity decreased noticeably to only about 1 billion USD, so the CFO expects that Plug needs in the next 12 to 18 months between 1 and 1.5 billion USD in new liquid capital.
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Is an offering (share placement) coming soon or will a credit of over 1 billion USD be given by the DOE (Department of Energy) via the Inflation Reduction Act? Best could be a convertible bond at the value of 1 to 2 billion USD, as large funds are focusing especially on green bonds that fit with the sustainability theme and the company has sufficient capital. The stock market, meanwhile, appears skeptical and has let the share price plummet.
“By the end of 2023 we aim to generate 1.4 billion dollars (USD) in revenue, commission more than 200 tonnes of liquid green hydrogen plants and become the largest global player, exceed 400 million dollars in electrolyzer sales, deploy 30 megawatts of stationary power products, which will serve as a substantial source of recurring revenue for Plug and finally clearly demonstrate the path of profitability for all our investors.”
Plugquarterly report
That’s a lot of nice talk – but realistic? The forecasts are maintained: 1.2 to 1.4 billion USD turnover is taken as the target for the entire year 2023. The plans are huge. Alone in the business area of electrolysis, a capacity of 7.5 GW will be expected. The current figures (order book with about 224 million USD for electrolysis) speak a different language. The target level corresponds to a sales potential of up to 5 billion USD. Realistic? When?
There are many new sites in the world where hydrogen could be used in forklifts – the basis of their business with customers like Amazon and Walmart. But Plug needs to produce the liquefied hydrogen itself and earn money from it instead of buying it, even at a loss, from third parties, is my assessment. Otherwise, each new customer brings a loss with it, is my subjective view.
Plug calculates the price for hydrogen based on 0.03 USD per kWh in the USA as 2.75 USD per kg. In Europe, because of the imposed conditions and the price of electricity, around 0.75 USD per kg higher. If costs such as liquefaction and transportation are included, however, then 4.50 to 5 USD per kg is a realistic basis. Here, the subsidy via the US Inflation Reduction Act of 3 USD per kg will have a positive impact (profit margin).
Summary: Plug Power will require still longer before the share can be recommended as a buy. After placement of a convertible bond (my expectation/prediction). And then sufficient liquidity for all the ambitious plans must be reassessed. The company has very good potential to become a top player in the hydrogen sector. One should still be critical, however, since Plug is working on a large number of projects (building up capacity) in parallel, possibly positioning itself too broadly, and this at many different construction sites at the same time, and then also internationally active. Less is more, I would say. The company is for me – after studying the 10-Q (quarterly report) – too little transparent. Starting 7 USD, I’d consider the share.
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.
That happened fast: From 0.60 USD to over 3.70 USD in a few weeks and then the bounce back under 1.50 USD – triggered by the abrupt departure of Michael Lohscheller as CEO and president. The outlook, though, cannot be better, even if not everything is following a straight line – certainly the case at the stock exchange and in the share price. But Nikola Motors is a startup, and that contains some risk and some rough paths in the still young company history. In detail:
The news hit like a bomb: CEO Lohscheller is going back to Europe and is ending his career at Nikola – immediately operationally, but he will remain as a consultant during the transition until the end of September. Lohscheller gave as reason for his departure an illness in the family. He achieved great things for Nikola in a difficult environment and positioned the company well during its early days. His successor, Steve Girsky, is no stranger, though. For quite some time – since the beginning and IPO – he has had a management function at Nikola, most recently as chairman. Earlier, he brought Lohscheller in to join him at Opel and later likewise at Nikola. At GM, he was on the board and was in charge of the company turnaround at the time. In answer to an analyst’s question whether he was only taking a transitional role as Nikola CEO, Girsky said, in essence: He’s here to stay.
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Another personnel issue is weighing on the company: The president of energy responsible for the Hyla brand has left the company – reasons unknown. Here too, however, a solution should quickly be found.
Prior to this was the vote on increasing the authorized share capital from 800 million to 1.6 billion shares, which was decided in favor at the annual shareholders meeting on August 4, 2023. A simple majority was finally enough after the change in legislation (before, a majority of all outstanding shares was required). Once again, Nikola has the power to generate new company capital via issuance of shares – through ATM (at-the-market) transactions but also placement with institutional or even strategic investors or through convertible bonds.
An existing ATM program with Citicorp worth 600 million USD was extended on August 4, 2023. Nikola still needs, according to its own predictions, a good 600 million USD in order for the company to be positioned in the next two years to enter the profit zone. Which is forecasted for year 2025 (cashflow positive).
Cost-cutting programs take effect
Very positive was the notice from the company that they are on track to reduce their capital requirement per quarter to 100 million USD by the end of 2023. Currently, the liquidity outflow (cash burn) lies at about 150 million USD in a quarter. In 2022, it was even over 240 million USD per quarter. All this shows that Nikola has correctly done its homework and is well positioned until it is in full swing. Goal: Sustainable breakeven with high sales growth.
Sales of 1,000 to 2,000 hydrogen-powered trucks are necessary to move into the black, was a take from the press conference on financial results (transcript). So far, they already have 200 Tre FCEV units across 18 customers in the books. That many such orders are coming can be safely assumed; after all, Nikola is the first to offer these trucks in large number. Remember: California is giving a subsidy in the amount of 288,000 USD per FC truck on top of the 40,000 USD via the Inflation Reduction Act from the US federal government. Additionally, the hydrogen is subsidized if it is green (regeneratively produced): 3 USD per kg, with an additional 2 USD per kg in California.
As a hydrogen-powered truck from Nikola costs 400,000 USD (the Tre BEV costs 324,000 USD before subsidies), this should get many shippers to buy, since it is heavy transport of long hauls that really needs to be decarbonized and there are many restrictions (emissions laws, restrictions up to and including the ban on diesel vehicle sales by 2035 in many places) creating pressure to convert truck fleets – to battery-electric and/or hydrogen-powered via fuel cell or hydrogen engine (the last exists but not yet in series production).
On top of this, remember that through the scaling of Tre FCEV production, the production costs per unit will drop significantly or, in other words, the profit margin will be increased. Currently, the cost of materials alone per vehicle is 275,000 USD. This will, however, come out to be more favorable with increased scaling. Now, there are ten gamma trucks that have been produced (for test trials with customers). The first Tre FCEVs will find delivery in September. Until the year’s end, 100 Tre FCEV units are targeted and additionally, of the already produced Tre BEV units, 100 to 150 could find buyers by the end of the year.
In the third quarter, the number of units should be 60 to 90 and bring a net turnover of 18 to 28 million USD (after deduction of the dealer discount). Currently, there are 139 on company premises and 92 at dealerships. Nikola will not continue producing these until the start of 2024, and even then only after each order placement – produce to order.
Anheuser-Busch as trump card?
With the beer giant Anheuser-Busch, Nikola has had a long cooperation – since 2018. Anheuser has prepared itself via LoI (letter of intent) to buy 800 Tre FCEVs. So far, a few Tre FCEVs have already been driving with Biagi Brothers, a company that transports goods on behalf of Anheuser, and have clocked over 12,000 miles (19,000 km) without a hitch. Will a solid order come out of this? The probability is very high, as so far Anheuser has shown no signs of turning its back on Nikola. With such an order, 1,000 FC trucks would then immediately be in the books. Battery-electric trucks for Anheuser will come from BYD (50 units) and sometime also 40 Semis from Tesla.
What’s certain: The focus is clearly on hydrogen-powered trucks, as money is earned with this – especially with hydrogen – 60,000 to 80,000 USD has been calculated as the average amount of hydrogen per vehicle per year in terms of dollars. And here Nikola is a first mover, where there is already a line of competitors with battery-electric models on the market.
Michael Lohscheller said regarding this: “Nikola is the real deal…. We think we are the best position company to lead the commercial zero emission transition and accelerate the hydrogen economy.” Nikola will offer various purchasing options for the Tre FCEV, since some customers prefer to acquire the truck based on a lease deal and would like to see the hydrogen directly included via a flat rate. Anything is possible.
News in the past weeks
Two programs at once to promote H2 infrastructure in California can be made use of by Nikola. For eight H2 refueling stations, there are subsidies of over 58 million USD. This should be valuated very positively, as Nikola has already concluded an agreement with Voltera (subsidiary of investment fund group EQT) for the construction of 60 stations over the coming years and will get further support through their subsidization.
An order for 13 e-trucks (10 battery-electric and 3 hydrogen-powered) from J.B. Hunt was able to be gained. This company operates its own extensive fleet, but also provides freight shipment and logistics services for over 1 million trucks in the USA. That looks like a springboard for much more.
Battery supplier Proterra under bankruptcy protection
A credit due of over 170 million USD has prompted battery supplier Proterra to seek Chapter 11 bankruptcy protection. The aim was to gain enough time to make use of the still available liquidity of over 60 million USD, as the said credit could be frozen via Chapter 11 if the court decides that. Battery production is continuing, however, so Nikola (but also Daimler Truck) can expect to be further supplied, although Nikola could very well also use LG as another supplier. With Proterra, however, shareholders will now be left empty-handed should a recapitalization take place. The holders of the bonds could become shareholders if equity (shares) come out of the liabilities.
Problems with battery-electric trucks
Weeks ago, two battery-electric vehicles on the company premises caught on fire, the cause of which was confirmed as a defect with the coolant. Nikola has addressed this and announced a recall of the about 209 Tre BEVs. In addition, the recommendation was made to have a way to remotely monitor the trucks at all times and to not park them in halls. The problem has been recognized and will be fixed, is the impression from the investigations. On top of this was the report that Nikola will not reach the sales target of 350 to 500 Tre BEVs in 2023. More important, though, are the Tre FCEVs, whose sales have just started.
Liquidity situation eases noticeably
If you add up all the possible forms of financing and liquidity procurement, Nikola has, as per the start of July, 743 million USD in potential. Included in this is, among other things, the funding commitment from Tummin that still amounts to over 200 million USD and can be used by Nikola at its own discretion (issuance of shares as countervalue). The liquidity base amounted to 295.4 million USD at the end of the second quarter (see above). Contained in this is the gain from the deal with Iveco of 26.5 million USD and the sale of land (sale & lease back) from the company grounds in Coolidge, Arizona for 49 million USD.
The revenue from sale of the planned hydrogen production facility in Buckeye to Fortescue Future Industries in the amount of 20.7 million USD is included in the total liquidity in July, but not in the figure as per June 30, 2023, so Nikola then has 316.1 million USD in cash available. This should be sufficient for the time being, although further shares can be issued at any time ATM (at the market), as Nikola now theoretically has up to 800 million shares for issue.
From the press conference, it can be gathered that this option will now be used with less less pressure and fewer conditions. Essentially, new shares will not be placed at just any price – but it will really be up to the bank to decide how this ATM program is implemented. In any case, it will be a very important event if Nikola receives inflows of 100 to 300 million USD through the ATM program and is thus fully financed. The stock exchange will value this – if it occurs – very positively.
Convertible bond of 325 million USD
Nikola is issuing a convertible bond with a nominal value of 325 million USD and a coupon in the amount of five percent. Large investors in particular like to invest in such securities, especially when as in this case with Nikola they’re also green bonds. Since the bonds can be converted into shares, the holder receives in addition to the return, the added potential of gains in the share price, while the holder receives the original capital back at the end of the period if conversion does not take place. For Nikola, this will yield the possibility of being able to settle such debts through shares (own capital), if the share price develops favorably.
Summary
The shares of Nikola will remain very volatile, especially since short-sellers have a great interest in depressing the share price and using any further negative-seeming news for their own advantage. As per the end of July, 138.5 million shares have been sold short – over 23 percent of the free float. At the same time, the company will become more and more attractive the more the two truck variants find buyers and the infrastructure (charging stations and H2 refueling stations – mobile or with fixed location) is developed as well as the required hydrogen generated (from outside or in-house production).
Nikola is a frontrunner in its market and in my opinion has the potential to become a kind of Tesla for trucks. The continuous increase of this stock in portfolios through institutional investors demonstrates the confidence in the company. Time is needed, as real growth will only really take off in the next two to three years. Equal to consider is that the stock exchange is an anticipation mechanism that allows future developments (expectations) to flow in long before their concrete appearance in the price development.
In the further course of year 2023, I expect a price range between 1.50 and 4 USD, but already 5 to 10 in 2024, and 15 to 20 in 2025. Particularly the order influx for the Tre FCEV will drive the share price already in the short term, as the sales and earnings potential can be derived on this basis.
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.
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The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
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