Nikola Sinks 15% In Extended Trading On Share Offering

Shares in Nikola Corp. (NKLA) plunged almost 15% in extended market trading on Friday as the maker of hydrogen-fueled vehicles filed an offering to sell 23.9 million shares of common stock.

The stock dropped to $41.78 in after-market trading on Friday. According to the SEC filing, the 23,9 million shares of common stock are issuable upon the exercise of 890,000 warrants originally issued in a private placement in connection with the initial public offering of VectoIQ and up to 23 million shares. The company expects to receive $11.50 per warrant and generate up to $274.7 million from the exercise of the warrants.

In addition, the preliminary share prospectus disclosed that shareholders may offer from time to time to sell 53.4 million shares of common stock.

Since Nikola went public on June 4 via a merger with VectoIQ, the stock soared from below $15 before the deal was announced to $48.84 at the close on Friday. Shares in the company, which plans to manufacture hydrogen-electric trucks but has not yet produced or sold any vehicles, have plunged 28% over the past month.

J.P. Morgan analyst Paul Coster this month raised NKLA to Buy from Hold and maintained a $45 price target, saying that the stock is “starting to look attractive for long-term investors”.

“We believe the stock does not fully price in successful execution of the multi-year growth strategy, which yields earnings power of ~$1.7bn EBITDA in 2027,” Coster wrote in a note to investors. “We could get less constructive in a hurry, if the firm fails to execute to plan, or if competition ratchets up faster than we anticipate.”

The analyst pointed to a “number of potential positive catalysts in coming weeks and months” such as a partner to produce its Badger pick-up truck, plans for hydrogen charging stations in the UK, andpotentially accelerated implementation plans for the FCEL truck in the U.S”.

For now NKLA has four analysts covering the stock, who are divided between 2 Buy ratings and 2 Hold ratings adding up to a Moderate Buy consensus. The $56 average price target puts the upside potential in the shares at 15% over the coming year. (See NKLA stock analysis on TipRanks).

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