Nikola's stock price slump prompted Nasdaq to threaten to delist the electric truck maker's stock for the first time in eight months. But don't expect the company to panic.
The quickest way to eliminate this threat is through a reverse stock split. In a reverse stock split, a company issues a multiple of the number of outstanding shares, usually one new share for every 20 or more shares. But absent positive news that prompts such a move, the Nasdaq's scrutiny could continue.
“Nothing really changes, but [it creates] Because the stock price is going to be high,” Nikola CEO Steve Gursky said in an interview with FreightWaves in December. [A reverse split] It has not gone to the board meeting. That doesn't mean it won't come out. If you look at the top five things we're working on, it's not one of his. ”
180 days until stock price rises
Nikola has 180 days, or until July 17, for its stock to break above $1 for 10 consecutive trading sessions. If this is not possible, an extension may be requested before any action is taken. Nasdaq issues a delisting warning if a stock's price falls below the $1 threshold for 30 consecutive days. Nikola has traded for less than $1 every session since Dec. 5, and closed at 65 cents on Friday.
Nasdaq started its watch with Nikola being delisted in May. However, the stock price recovered from a low of 54 cents on June 5th to $3.40 on August 4th, meeting the listing requirements.
“Stocks are tied to companies like a rubber band,” Gursky said. “Sometimes they get ahead of the curve and sometimes they get pushed back. All we can control is how well the company performs and keep our customers happy.”
A reverse split could hasten the demise of the business.
Many transportation startups have used this tactic to artificially inflate their stock prices. In some cases, it can backfire and lead to business failure.
Self-driving truck developer Embark Trucks, electric truck developer Lightning E-Motors, and battery manufacturer Proterra have conducted a reverse split. Embark sold its flag business in May. Proterra filed for bankruptcy protection in August. The Lightning then went into receivership in December.
Nikola's stock price fell 76% last year, partly due to the company increasing its authorized shares from 800 million to 1.6 billion. With few other ways to raise money to expand its fuel cell electricity and hydrogen supply business, Nikola used the new shares to raise money even as existing shareholders believed their stock was diluting its value.
Green shoots of business?
The company reported wholesale sales of 35 hydrogen fuel cell trucks valued at $450,000 in the fourth quarter. The remaining seven are in customer testing.
IMC, the nation's largest drayage fleet that transports containers from ports to warehouses, has ordered 50 Nikola fuel cell trucks for use in California, Arizona and Nevada for $22 million, according to the website Hydrogen Insight. .
Nikola has not said when it will release its fourth quarter financial results, including its cash position.
Nikola's cash position has been strengthened through stock sales and borrowings. But the company still has a going concern notice, filed with the Securities and Exchange Commission's 10-K report last February, indicating possible bankruptcy.
“We have not been able to resolve going concern concerns,” Mr. Gursky said. “We have been successful in improving the cash profile of our business by keeping our customers happy and getting trucks to the job site.”
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