Investor confidence in Nikola took a severe hit as the electric truck manufacturer announced the pricing of a substantial stock sale and the intention to issue $175 million in new debt with an 8.25% annual interest rate. This move led to a sharp decline in Nikola’s shares on Friday.
The sale of 133.3 million new shares would significantly increase the total outstanding shares to nearly 1 billion. Shareholders, who had previously assented to doubling the authorized shares from 800 million to 1.6 billion in August, now face dilution of their holdings as the company issues new shares.
Despite already having a notice of going concern on file with the Securities and Exchange Commission, Nikola revealed in a February 23 filing that it might face a financial crunch within the next 12 months, potentially requiring business modifications or termination.
The Phoenix-based company, with cash and equivalents amounting to $362.8 million as of September 30, stated that these funds would cover the expenses related to a truck recall and sustain operations until 2024. However, former CFO Stasy Pasterick, who resigned on December 1, mentioned this information on a November 2 call with analysts. CEO Steve Girsky is currently handling her duties on an interim basis.
Nikola had set aside $61.8 million to replace battery packs in 209 electric trucks recalled in August due to underhood fires. The company now seeks additional funds to expand its hydrogen fuel cell electric truck business and attract customers for its loss-making trucks, which are priced at $450,000 before factoring in the cost of expensive and scarce hydrogen fuel.
Following the announcement of the stock and debt offerings, Nikola shares plummeted by 22% on Thursday, closing at 76 cents. The sell-off continued on Friday, with shares closing at 71 cents on the Nasdaq. The newly introduced green convertible senior bonds, maturing in 2026 and offering an 8.25% interest rate, contributed to the downward trend.
