Nikola Stock Falls to Record Lows Amid Bankruptcy Reports

Nikola stock fell to a new record low yesterday and its market cap fell to a mere $72 million amid reports that the company is looking to sell its assets amid its dwindling cash pile. There is also speculation that the company is considering a bankruptcy filing.

Bloomberg reported that according to sources, Nikola is considering selling the company in parts or in entirety. It is also contemplating onboarding partners or raising funds for its cash-guzzling operations.

Nikola Is Said to be Considering a Sale

In its emailed statement, Nikola said, “Despite external headwinds in the EV sector, we have been relentlessly working to raise capital, reduce our liabilities, preserve cash and provide excellent service for our customers.”

During the Q3 earnings call, responding to a shareholder’s question on whether Nikola was actively looking at partners who can provide it with the much-needed capital, CEO Steve Girsky responded in the affirmative.

“We are actively talking to lots of potential different partners who value what we do and value what we’ve built,” said Girsky. He added, “It’s because we’ve been doing the hard work out front building the framework, and we have proof points. We’re on the road today with customers.”

Notably, Girsky is Nikola’s fourth CEO since its 2020 listing and some reports suggest that even he is on his way out amid the company’s financial woes.

Nikola Might Be Considering a Bankruptcy Filing

In a series of tweets, Fred Lambert, editor-in-chief of Electrek said on X that Nikola is considering a bankruptcy filing. In one of his tweets, he said that according to a source, Nikola’s “bankruptcy filing is already in the hands of lawyers.” He added that Nikola has let go of more employees. While Lambert tried reaching out to Girsky he did not respond.

“The company has been radio silent for weeks now. It is behind on filing its production/delivery numbers. A drove flyover of the factory last week showed still over a hundred trucks sitting in the dust without batteries,” said Girsky in the tweet.

In another tweet, he said, “The same source confirmed something I’d heard from another source: Hyundai was looking into the company, but it has backed out. Now, bankruptcy liquidators were at Nikola this week to evaluate the assets.”

Many EV Companies Have Gone bankrupt

To be sure, Nikola going bankrupt won’t be surprising given the company’s financial woes. It held cash and cash equivalents of a mere $198 million at the end of September which it said was enough to fund its operations until into the first quarter of 2025. The company filed to raise $100 million in December as it yet again approached markets to fund its burgeoning cash burn.

The startup green energy space has been quite troubled and earlier this week EV startup Canoo filed for a Chapter 7 bankruptcy. The company joined the ranks of Fisker, Electric Last Mile Solutions, Bird Global Lordstown Motors, and Proterra. All of these companies went public through the SPAC (special purpose acquisition company) route between 2020 and 2022 and capitalized on the EV and SPAC mania to garner attractive valuations.

Nikola Went Public in 2020

When Nikola went public in 2020, it was among the first EV SPACs. At its peak in 2020, the company’s market cap was in excess of $30 billion and it surpassed Ford’s then valuation.

It was among the early signs of an impending bubble in EV stocks. However, thanks to the Fed’s accommodative monetary policies and scores of SPACs hunting for EV targets, the bubble continued to build and only got bigger by the end of 2021.

The SPAC bubble has since burst and many de-SPACs, or the companies that went public through SPAC reverse mergers are now fighting for survival.

EV Bubble Has Burst

Startup EV companies are also struggling. For instance, when Rivian was listed in 2021, it became the biggest listing since Facebook’s 2012 listing. Rivian’s IPO sailed through easily and the company priced the shares at $78 each, which was above the already increased price range. The stock had a good listing and went on to hit an all-time high of $179.47, which was over twice the IPO price.

At its peak, Rivian commanded a market cap of over $150 billion which was even higher than General Motors, America’s biggest automaker. Even Lucid Motors’ market cap reached almost $100 billion in 2021.

While all these high-flying EV names trade at a tiny fraction of their record highs, Tesla is a notable exception and the company surpassed its November 2021 highs last year amid the steep rally following Donald Trump’s election.

NKLA’s Woes Began in 2020 Only

Meanwhile, Nikola’s woes began shortly after its bumper listing. In September 2020, Hindenburg Research released a bombshell report alleging the company of fraud. The report, which came ahead of General Motors’ proposed investment in Nikola (which was eventually called off) said, that “in the face of growing skepticism over the functionality of its truck, Nikola staged a video called “Nikola One in Motion” which showed the semi-truck cruising on a road at a high rate of speed.

It added, “Trevor has managed to parlay these false statements made over the course of a decade into a ~$20 billion public company. He has inked partnerships with some of the top auto companies in the world, all desperate to catch up to Tesla and to harness the EV wave.”

Eventually, Trevor was sentenced to a four-year prison for defrauding investors. However, Nikola could never recover from its initial setbacks.

Nikola tried to restructure its business to conserve cash and focus on key priorities. It exited Europe to focus on North America and also liquidated the assets of Romeo Power. It laid off employees in multiple tranches and has been lowering its cost base.

Nikola Stock Falls to Record Lows

Nikola has been hitting new lows and fell to a new record low yesterday. Nikola’s monthly cash burn is in the ballpark of $40 million despite the company’s efforts to lower the cash burn is less than twice the monthly cash burn which is a precarious situation.

While Nikola hasn’t officially stated whether it is looking at strategic alternatives including a bankruptcy filing, such an event might not be totally surprising given the continued bloodbath in the startup green energy space.