Nikola Company is considering raising nearly $400 million through the sale of company shares. Management is looking for cash to increase production in an environment of rising capital costs:
- Nikola has been hit by rampant inflation and higher labor costs as well as the raw materials needed to produce cars. The company stressed that it can stop selling shares at any time. At the same time, by signing a contract for a potential sale of assets, the management 'opens a door' for itself for a black hour by which investors' pain may increase further;
- Shareholders have little to be happy about. In August, Nikola received investor approval to increase its outstanding shares by 200 million (the current 800 million versus 600 million previously);
- The company's founder and, in the past, also CEO, Trevor Milton voted against issuing new shares at the first shareholder meeting in 2022, according to a Bloomberg report. Meanwhile, the board of directors today indicated that Citigruo Global Markets will be a potential agent for the sale of shares;
- Nikola is another company that enjoyed its heyday during the frenzied bull market of late 2020 and early 2021. In June 2020, the company's share price approached nearly $70 per share. The current level near $5.50 per share represents a more than 90% correction from the peaks.
- Debt-financed companies are experiencing problems, and Nikola's management moves may indicate potential problems for other companies with high costs of developing and scaling services, among others, Virgin Galactic (SPCE.US).
Nikola (NKLA.US) stock chart, D1 interval. Sentiment around the electric car manufacturer's stock remains at very low levels. The chart perfectly shows how strong resistance for the price is provided by the 200-session average, which currently runs around $7.80. A sudden attack by demand towards $8 could herald a broader rebound, but for the moment demand is still under tremendous pressure. Source: xStation5
