Nikola Corp.’s languishing share price prompted the Nasdaq to threaten the electric truck maker with delisting its stock for the second time in eight months. But don’t look for the company to panic.
The quickest way to remove the threat is a reverse stock split, in which a company issues one new share for a multiple of outstanding shares, usually one for 20 or more. But without positive news driving such an action, Nasdaq scrutiny could continue.
“It doesn’t really change anything, except [it creates] the higher share price,” Nikola CEO Steve Girsky said in a December interview with FreightWaves. [A reverse split] hasn’t come up at the board. It doesn’t mean it won’t come up. When we look at the top five things we’re working on, that’s not one of them.”
180 days to get share price up
Nikola has 180 days, or until July 17, to get its share price above $1 for 10 consecutive trading sessions. Failing that, it could petition for an extension before any action would be taken. The Nasdaq issues delisting warnings when a stock trades below its $1 threshold for 30 consecutive days. Nikola has traded below $1 every session since Dec. 5. It closed Friday at 65 cents.
The Nasdaq started the clock on a Nikola delisting in May. But the share price recovered from a low of 54 cents on June 5 to $3.40 on Aug. 4, meeting the listing requirement.
“Stocks are connected to companies like rubber bands,” Girsky said. “Sometimes they get ahead, sometimes they get behind. We can only control what we control, which is the performance of the company and satisfying our customers.”
Reverse splits can hasten a business demise
A host of transportation startups have used the tactic to artificially bolster their share prices. Sometimes, it backfires and contributes to business failure.
Autonomous trucking developer Embark Trucks, electric truck developer Lightning eMotors and battery maker Proterra Inc. executed reverse splits. Embark sold its flagging business in May; Proterra filed for bankruptcy protection in August; and Lightning went into receivership in December.
Nikola’s shares have fallen 76% in the last year, partly because it increased its number of authorized shares to 1.6 billion from 800 million. With few other avenues to raise money for scaling its fuel cell electric and hydrogen dispensing business, Nikola has used the new shares to raise money while existing stockholders saw their shares diluted in value.
Green shoots of business?
The company reported wholesaling 35 of its $450,000 hydrogen-powered fuel cell trucks in the fourth quarter. Another seven are in customer testing.
IMC, the nation’s largest drayage fleet, which hauls containers from ports to warehouses, has placed a $22 million order for 50 Nikola fuel-cell trucks for use in California, Arizona and Nevada, according to the website Hydrogen Insight.
Nikola has not said when it will release Q4 earnings, which will include its cash position.
Equity sales and borrowing have bolstered Nikola cash position. But it still has a notice of going concern — hinting that the business could go under — that was filed with its Securities and Exchange Commission 10-K report last February.
“We’re not managing to get rid of a going concern,” Girsky said. “We’re managing to improve the cash profile of our business, satisfying our customers and getting trucks in the field.”
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