The sun may be setting for Phoenix-based Nikola Motors after a recent Bloomberg report said the electric truck maker is considering a possible sale or partnership as it attempts to raise capital to stay afloat. This is not new for Nikoka, but like a financial game of musical chairs where you burn the chairs to keep warm, there may be no more chairs left.
MSN reported that Nikola’s stock price has collapsed to a record low. The company once worth $26 billion in 2020 is now estimated at $74 million.
The issue is Nikola requires a substantial amount of capital to keep the lights on. Luca Socci, an investor with Seeking Alpha wrote, “Nikola needs around $500 million per year to fund its operations. Every year it needs to find new investors to finance its operations. So far, either through share issuance or private investors, the company has been able to cope and survive.”
A SPAC, a short seller, a former founder and a saga
The cash crush, yearslong in the making, has seen everything from layoffs, stock splits, short-seller reports, fraud convictions, and the selling then releasing of its Phoenix headquarters.
The saga began when the company went public in June of 2020 through a special purpose acquisition company that raised more than $700 million. By September 2020 short seller analysts at Hindenburg Research wrote a blistering report alleging “intricate fraud” by the founder Trevor Milton.
Former FreightWaves Detroit Bureau Chief Alan Adler noted, “Hindenburg claims it uncovered dozens of lies and misrepresentations by Milton, who founded Nikola in 2014 after selling a natural gas truck fueling business to Worthington Industries. Mark Russell, who retired in August 2018 as Worthington president and chief operating officer, is CEO of Nikola.” (Adler covered Nikola in-depth during his tenure with FreightWaves. Read his coverage in the Truck Tech archives).
10 days later, Trevor Milton, who at the time was the executive chairman resigned and departed the company. At the time of his ousting, Milton owned approximately 82 million shares or 20% of the company, worth about $2.8 billion.
While Nikola cycled through CEOs and weak sales, Milton was convicted and sentenced to four years in prison for securities fraud. Nikola was able to win $165 million in arbitration from Milton to cover the $125 million plus interest on a Securities and Exchange Commission fine.
Nikola rages against the dying of the light
The recent moves by Nikola can best be described as throwing everything at the cash flow problem including the kitchen sink. Alder wrote last October, “Nikola sold and leased back its plant and Phoenix headquarters in earlier cash-raising moves. Nikola has some intellectual property. But it mostly assembles key components purchased elsewhere. The Iveco S-Way is the basis of the truck. Robert Bosch makes the fuel cells. Batteries come from Proterra, now part of Volvo Group following Proterra’s bankruptcy.”
The company used to make its own batteries via Romeo Power which it bought back in August 2022 for $144 million. But by July 2023 it liquated the battery pack maker, causing additional challenges. Adler wrote the move forced startups to sue Nikoa over canceling Romeo orders to get in line for possible payouts for alleged damages and contract breaches.
Adler added it also helped remove some attention from Nikola, “which has pivoted from manufacturing battery-electric trucks to focus on fuel cell electric vehicles (FCEVs). The hydrogen-powered trucks require just two battery packs compared to nine for battery-electric vehicles. Those packs are being sourced from Proterra Inc.’s plant in Greer, South Carolina.”
The company had also previously conducted layoffs in October and December of 2024 to extend its runway. The October layoffs were 135 employees or 15% of Nikola’s workforce while the exact number of layoffs in December were not disclosed.
While Nikola looks for suitors or saviors, a development to watch will be what it sells off next. One recent move was Mullen Automotive announcing last Thursday the purchase of battery line equipment from Nikola for its Fullerton, California battery operations.
Mullen had previously purchased battery production assets from Romeo Power back in September 2023 when it was a subsidiary of Nikola for around $3.5 million. The deal included, “equipment, inventory and intellectual property for high-volume EV battery pack and module production.”
SEC filings suggest time is running out
For Nikoka, their most recent SEC filing gave more details about their current situation. During an 8-K filing last December, the company reported, “we have a history of losses, expect to incur significant expenses and continuing losses for the foreseeable future, and there is substantial doubt about our ability to continue as a going concern.”
Nikola remains unprofitable. The filing added, “we incurred net losses of $966.3 million, $812.7 million and $481.2 million for the year ended December 31, 2023 and for the nine months ended September 30, 2023 and 2024, respectively, and have an accumulated deficit of approximately $3.6 billion from the inception of Nikola Corporation.” Niloka estimated in the filing that their existing financial resources are only enough to fund their forecasted operating costs and obligations into but not through the first quarter of 2025.
While the company has taken steps to reduce its cash requirements and boost its runway, “our efforts in this regard are ongoing but may not be sufficient, particularly without additional capital.”
Nikola is also yet to announce its 2024 fourth-quarter financial results which could illuminate the details behind just how much is left in its tank.
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