Nikola’s stock price decline prompted the Nasdaq stock market to threaten the electric truck maker to delist its shares for the second time in eight months. But don’t wait for the company to panic.
The quickest way to remove the threat is a reverse stock split, where a company issues one new share for several existing shares, usually one share for 20 or more. But without positive news to prompt such action, scrutiny of the Nasdaq could continue.
“It doesn’t really change anything, except (it creates) a higher stock price,” Nikola CEO Steve Girsky said in a December interview with FreightWaves. (reverse division) did not appear on the board. This doesn’t mean it won’t come. When we look at the top five things we’re working on, this isn’t one of them.
180 days to raise the stock price
Nikola has 180 days, or until July 17, for its stock price to reach above $1 for 10 consecutive trading sessions. If this fails, it can apply for an extension before taking any action. The Nasdaq issues delisting warnings when a stock trades below the $1 threshold for 30 consecutive days. Nikola has traded for less than $1 in every session since December 5. It closed Friday at 65 cents.
The Nasdaq started the clock by delisting Nikola in May. But the share price recovered from a low of 54 cents on June 5 to $3.40 on August 4, meeting listing requirements.
“Stocks are attached to companies like rubber bands,” Girsky said. “Sometimes they’re ahead, sometimes they’re behind. We can only control what we control, which is the performance of the company and the satisfaction of our customers.
Reverse splits can accelerate the demise of a business
A group of emerging transportation companies have used this tactic to artificially boost their stock prices. Sometimes, this backfires and contributes to business failure.
Autonomous trucking developer Embark Trucks, electric truck developer Lightning eMotors, and battery maker Proterra Inc. Performing reverse division operations. Embark sold its struggling business in May; Proterra filed for bankruptcy protection in August; The Lightning went into receivership in December.
Nikola shares have fallen 76% in the past year, partly because the number of its authorized shares increased to 1.6 billion shares from 800 million shares. With few other avenues to raise money to expand its fuel cell electricity and hydrogen distribution businesses, Nikola used new shares to raise cash while existing shareholders saw the value of their shares decline.
Green shoots of business?
The company announced the wholesale sale of 35 of its hydrogen fuel cell trucks worth $450,000 in the fourth quarter. Another seven are in customer testing.
IMC, the nation’s largest towing fleet, which moves containers from ports to warehouses, has placed a $22 million order for 50 Nikola fuel cell trucks for use in California, Arizona and Nevada, according to Hydrogen Insight.
Nikola did not say when it would announce fourth-quarter earnings, which will include its cash position.
Stock sales and borrowings boosted Nikola’s cash position. But it still has a Notice of Continuing Concern — indicating the business may collapse — which was filed with its 10-K SEC report last February.
“We can’t get rid of business continuity,” Girsky said. “We are working to improve the cash position of our business, satisfy our customers and get trucks into the field.”
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Nikola receives delisting warning from NASDAQ
Click for more FreightWaves articles by Alan Adler.
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