Remember Nikola?
In early September, while we were all enjoying the final dregs of lockdown-free sunshine, it came to light that the fledgling hydrogen-powered truck company might not be quite all it seems.
Following a quite frankly hilarious short report in which the author, Hindenberg Research, claimed that Nikola had overstated its technology, overpaid insiders and — most memorably — rolled a truck down a hill to prove its vehicles worked as part of a marketing campaign, everything unravelled.
The stock got slashed in half, founder Trevor Milton departed , and the US Department of Justice subpoenaed both the company and Mr Milton. After touching a market capitalisation of $28bn in midsummer, Nikola was worth just under $7bn by September’s end.
With no revenues bar those earned from its departed founder , and its product line still a long way off materialising in wheeled form, in normal circumstances you’d have expected Nikola to keep shedding market value. Particularly as it seemed its one credible partner — General Motors — was beginning to get cold feet on the deal it signed shortly before the Hindenberg report.
Yet these are not normal times. And in fact, the opposite has happened. Today, Nikola’s market cap hovers at just under $10bn. Which, for context, is one-sixth of General Motors’, and just under a third of Ford’s.
Reasoning as to why is difficult, bar the bleedin’ obvious line that the entire electric vehicle market has gone absolutely nuts.
Don’t believe us? China’s electric car hopeful NIO is valued at $65bn, despite reporting just $629m of revenues in the last quarter on Tuesday. And then there are others, like Xpeng at $33bn, and Workhorse Group at $2bn. Not to mention Tesla’s ludicrous-mode market cap of $474bn (obvs).
You can argue about the merits of each business individually — and Lord knows people have (including us) — but taken in aggregate it all looks rather darn bubbly.
Which brings us back to Nikola. On Tuesday 1 December, according to the company’s latest 10-Q , “161 million shares of our common stock will become eligible for sale beginning on December 1, 2020 upon the expiration of the lock-up agreements.” Its current free float is 141m shares — just under 37 per cent of the total shares outstanding — according to Refinitiv Eikon.
Now, we’re not economists by any means, but we’re pretty sure we know what happens when the supply curve is shifted so aggressively to the right. December might be particularly cold for its current crop of shareholders, even if they’re living in the southern hemisphere.