Nikola Stock Rose After Announcing New COO: Key Takeaways

Nikola (NYSE: NKLA) – the startup electric vehicle (EV) company that went public in 2020 has had quite a volatile run as a listed company. It rose over 33% yesterday after the company hired Mary Chan a former General Motors (NYSE: GM) executive as its COO.

In its release, Nikola said, “In her capacity as COO, Chan will lead the company’s engineering, program, product, supply chain, and manufacturing teams. Her appointment aligns with the vision of President and CEO Steve Girsky to streamline decision-making processes and bolster Nikola’s reputation for excellence in engineering and manufacturing.”

Nikola stock rises after announcing new COO

This is yet another change in the struggling EV company’s C-suite and it has had four CEOs in as many years – and most recently Stephen Girsky who was the chairman also took over as the CEO after his predecessor Michael Lohscheller stepped down due to a “family health matter.”

Chan incidentally was a Managing Partner at VectoIQ II – the special purpose company whose predecessor took Nikola public.

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.

NKLA went public through a SPAC reverse merger

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.

Many startup EV companies are finding it hard to survive and earlier this year Lordstown Motors filed for bankruptcy.

Nikola recalled vehicles

Meanwhile, Nikola has struggled with execution, and last month it announced a voluntary recall of 209 Class 8 Tre battery-electric vehicles and halted sales. It said that its internal investigation shows that the likely source of the fire was likely a single supplier component in the battery pack and said that it would commence repairs in the coming weeks.

NKLA has signed many deals

Nikola has signed many deals and on July 5, it announced that it has received a grant of $41.9 million from California to build six heavy-duty hydrogen refueling stations across Southern California.

It also signed an agreement with BayoTech under which the latter would buy up to 50 Nikola Class 8 hydrogen fuel cell vehicles.

The sales would be spread over five years and the first 12 of these would be delivered between 2023 and 2024. On July 31, the company also announced a deal with J.B Hunt for 13 vehicles.

NKLA is restructuring its business

Nikola is restructuring its business to conserve cash and focus on key priorities. It has exited Europe to focus on North America and is also liquidating Romeo Power. It has also laid off employees and has been lowering its cost base.

Due to these measures, it managed to bring down its cash burn in Q2 2023 to just under $150 million and is looking to bring the annual cash burn to under $400 million by next year. The company is looking to raise more cash and now has the shareholder authorization to increase the authorized capital.

In Nikola’s Q2 2023 earnings release, Nikola  Lohscheller said that the company “has turned the corner and is well on the way to executing our business plan and achieving profitability. He added, “We have nearly doubled our unrestricted cash position while also substantially reducing our spending. We continue to drive forward in our mission to decarbonize heavy-duty trucking and ensure Nikola is successful for the long haul.”

Nikola expands dealer partnerships

Last week, Nikola announced the expansion of its dealer network into Canada to support the sales and service coverage of its Class 8 trucks and added ITD Industries as a partner. In his prepared remarks, Girsky said, “Bringing ITD on board as our first Canadian dealer is an exciting move for Nikola. Canada’s zero-emission vehicle friendly environment for Class 8 trucks, fueled by attractive incentives and its ambitious carbon reduction goals, makes it a strategic market for the future of transportation.”

Loss-making EV startups fall out of favor

Loss-making EV startups have been out of favor with investors. While massive losses did not scare away investors when interest rates were now – they are facing a funding winter now, as the Fed has raised rates to multi-year highs. Even some of the listed names are facing trouble raising funds as not many investors are willing to back perennially loss-making companies with unproven business models.

As for Nikola, like other startup EV companies, the road ahead looks quite bumpy amid a deteriorating economy and rising competition in the EV industry.

While the stock has tripled from its 2023 lows, it has been quite volatile and after the massive spike last week, it is trading lower in US premarket price action today.