Profit-taking early investors hammer Nikola stock price

Nikola executive chair with Budweiser Clydesdales

High-flying Nikola Corp. (NASDAQ: NKLA) came back to earth Thursday as early investors in the electric truck startup sold discounted shares at a handsome profit.

With lockup provisions lifted, investors in a private investment in public equity (PIPE) with VectoIQ were allowed to sell most of the 53.3 million shares purchased for $10 each before the special purpose acquisition company (SPAC) became Nikola in a reverse merger on June 2.

Nikola shares closed down 13.22% at $57.69 Thursday as PIPE investors realized gains exceeding $50 a share based on Thursday’s opening price of $64.27. Shares have traded in the mid-$60 range recently, temporarily buoyed Monday by the taking of preorders for the company’s Badger battery-electric pickup with a fuel cell range extender.

A tweet from Executive Chairman Trevor Milton on Thursday that $5,000 deposit Badger preorders were sold out briefly raised the stock price, but it didn’t last.

Nikola traded within cents of $100 a share on its third day of trading June 8. 

Milton, who owns about 35% of Nikola shares, declined to comment for this story.

Nikola retains the $525 million raised from the PIPE but gets nothing from the share sale. It could realize $274 million from the issuance of 23 million new shares that can be purchased with 890,000 warrants beginning  Friday, according to a June 15 S-1 filing with the U.S. Securities and Exchange Commission (SEC). 

The new shares would dilute the roughly 354 million original Nikola shares while consistent selling of the PIPE-issued shares could create an imbalance of buyers and sellers.

Analysts diverge

Two firms covering Nikola diverge in their target price for the stock. J.P. Morgan’s Paul Coster set a neutral price of $45 on June 22. Cowen, which advised VectoIQ in the reverse merger with Nikola and managed VectoIQ’s initial public offering two years ago, initiated coverage with an outperform rating of $79 on June 17.

Both buy into Nikola’s long-term prospects for developing zero-emissions trucks that run on fuel cells along with creating a network of hydrogen fueling stations.

“Nikola’s market opportunity is immense,” Coster said, adding that Nikola shares are “fully valued.”

“While the PIPE and warrant share lockup may pressure shares in the near term post the S-1 becoming effective, we are positive on the longer term story,” Cowen analyst Jeffrey Osborne said in an investor note Thursday.

Short selling sparring

Nikola won’t start building trucks or making money until 2021. Short sellers borrowing shares and hoping to profit if the stock price goes down control about 3% of company stock. 

Milton spars with short sellers on Twitter, much as Tesla Inc. (NASDAQ:TSLA) CEO Elon Musk did for years. Tesla became the world’s most valuable transportation company in the world on Wednesday, eclipsing Japan’s Toyota Motor Corp. (NYSE: TM)

Nikola laid out nearly 20 pages of risks in owning its stock. For example, its 14,000 orders for fuel cell Class 8 trucks are nonbinding until lease agreements are signed.

One of those customers, Anheuser-Busch InBev (NYSE: BUD), has ordered up to 800 trucks. Building hydrogen fueling stations along Anheuser-Busch routes is a top priority, second only to successfully launching battery-electric Nikola Tre trucks in Europe next year, Milton told FreightWaves in a May 28 interview.

Click for more FreightWaves articles by Alan Adler.

Related stories:

Fuel cell startup Nikola nears public trading debut

Will Nikola’s breakout chart path for other high-tech startups?

Shell stuffing: How Nikola became VectoIQ’s public preference