Dear Fellow Investor,
Electric truck manufacturer Nikola(NASDAQ: NKLA)’s stock (shameless riding of Tesla’s coattails, anyone?) has had quite the week.
- First, Nikola got a strong endorsement from a major U.S. auto manufacturer via a $2 billion ‘investment’ (which, after we looked into it, isn’t all it’s cracked up to be). NKLA’s stock immediately soared some 30%, from $35 to over $50.
- Then, before the company’s investors could sit back and enjoy their newly minted riches, the stock cratered to below the $35 it was at before the announcement on news that a major short seller was beginning to raise questions about Nikola’s entire business.
It’s enough to make an investor’s head spin. So, what gives?
Here’s what you need to know…
On September 8, none other than GM (NYSE: GM) announced it was investing $2 billion in the up-start electric truck maker, it’s stock took off, and then Hindenburg Research sucker-punched it, and the short-lived romance with Wall Street came crashing down to earth, well… like the Hindenburg.
Then, just a few days later, Hindenburg released a damaging report about Nikola last week questioning the up-starts inconsistent claims regarding its technology and capabilities, and therefore questioned the wisdom of GM’s investment.
To make matters worse, Nikola Corp. Executive Chairman Trevor Milton released a video in response noting “The long story short is, none of it even really matters.”
Apparently it does, as Nikola stock fell from $50.05 to $32.13 (a whopping 36% loss) between the 8th and the 11th of September.
But all is not lost.
While this might seem like the end for any start-up Nikola is backed by some heavy hitters secured early in the companies inception, including German auto-parts supplier Robert Bosch Gmbh and Italian truck and agricultural equipment company CNH Industrial NV, plus an 11% ownership stake by GM as icing on the cake.
It’s worth noting that the GM connection comes from the former GM Vice Chairman Steve Girsky’s VectoIQ, which is a special purpose acquisition company that took Nikola public.
Mary Barra, GM’s CEO, isn’t backing off the deal either as their initial investment is cashless. Perhaps the worst outcome for GM may be a black eye, at the very worst.
Your Bottom Line: Tech stocks continue to surge, so it bears keeping in mind that before you jump on the bandwagon investors should do their own thorough due diligence.
As for us, we here at Bottom Line Investor will be sitting on the sidelines of all this Nikola-stock drama.
The BLI Staff