Nikolai's 2021: Delayed deliveries, falling stock prices, cash shortages

Source: China Economic Network Jiang Zhiwen

"Given these challenges, Nikolai's options are limited and I have a neutral rating for the stock." Dan Ives, an analyst at Wadebush Securities, put it bluntly, "Nikolai will only be able to raise more money in the private or public market if he meets production targets in the near future." ”

On Tuesday (Dec. 21), electric vehicle startup Nikola agreed to pay a $125 million civil fine to the SEC, a follow-up to a Federal Regulatory Investigation by Nicola founder Trevor Milton last September to exaggerate the company's progress and mislead investors. Milton had promised to revolutionize commercial vehicles with hydrogen-fueled long-haul trucks and a nationwide network of hydrogen refueling stations.

Image source: Screenshot of the official website

Since 2021, Nikolai has launched a series of ambitious plans, including full-scale production of a pure electric heavy-duty truck, breakthroughs in fuel cells, and construction of a network of hydrogen refueling stations. However, as we move into 2022, Nikolai's above goals have not been achieved, and cash reserves are constantly decreasing.

As one of the first electric vehicle startups to go public through a merger with a shell company, Nikolai's stock price, which soared at one point, is now lower than the $10 per share issue price three years ago. Last year, Milton was forced to resign on fraud charges, General Motors withdrew from the partnership, and the company lost a major truck supply contract.

Mass production of new cars has been repeatedly delayed, hitting investor trust. While Nikolai says it has access to a lot of money (including an uncommon form of financing), it has consumed a third of the cash on hand in the past 12 months when it comes to developing all-electric trucks. Meanwhile, Nikolai's Tre electric heavy-duty trucks won't be put on commercial sales until early next year; Hydrogen-fueled trucks are currently only prototypes.

"Given these challenges, Nikolai's options are limited and I have a neutral rating for the stock." Dan Ives, an analyst at Wadebush Securities, put it bluntly, "Nikolai will only be able to raise more money in the private or public markets if he meets production targets in the near future." ”

At present, nikolai's management has eliminated once-promised products, such as electric pickup trucks and motorized recreational vehicles, and instead focused on producing electric heavy-duty trucks. Nikolai said that despite certain problems facing the supply chain, electric heavy-duty trucks will still be in full production until the end of the first quarter of 2022. According to the plan, Nikolai will start production of these vehicles at the Kurich plant in Arizona and the Ulm plant in Germany.

Deliveries of Nikolai's first model, the Tre electric heavy-duty truck, have been delayed twice this year, and the company now plans to produce 25 by the end of the year. Last week, Nikolai rolled off the production line of two Tre, but this is a pre-production vehicle that is not loaded with key components such as semiconductors, so it does not immediately generate revenue.

In 2020, Nikola merged with a special purpose acquisition company (SPAC) to secure more than $900 million in cash infusions. Milton, then CEO of Nikola, boldly predicted the company's good development prospects, and Nikolai's market value once exceeded that of Ford Motor.

However, Nikolai's current valuation has fallen to $4 billion. Nikolai expects to have about $350 million in cash on its balance sheet by the end of the year. Nikolai said that more funds have been obtained through equity credit lines. Earlier this year, Nikolai struck a deal with an unknown financier.

Under the equity line of credit, Nikolai has the right to require Tumim Stone Capital LLC to purchase the company's shares at a specific time at a price 3% below the market price. Nikolai can only get installments, and there is a ceiling. So far, Nikolai has asked for $72.9 million, with $527.1 million remaining.

As Milton's successor, Nicolas' current CEO Mark Russell said in a statement: "We believe this will provide Nikolai with sufficient cash flow to fund our current operations by the end of 2022."

Equity lines of credit are not a new form of financing, but they have not been widely used before, and are a last resort when ordinary forms of financing are unable to obtain funds. In July, Lordstown Motors, an equally troubled electric vehicle startup, struck a similar deal with an investment fund.

"Equity lines are mainly used for very small public companies, and the company's stock is underperforming." Tadashi Okamoto, a lawyer who specializes in bond and stock issuance, said: "Historically, it has had a very negative impact on the market because it has had a very significant dilution effect."

Public information shows that by the end of 2021, the company will receive a total of about $850 million in funding. "That's enough to fund next year," Nikolai said. However, Kim Brady, Nikola's chief financial officer, revealed last month that financing could be made in the form of a follow-up offering.

A year ago, Russell said Nicolas had received a promise from an unspecified strategic investor that he would keep his stake intact, but that was before the company's combined share price with SPAC fell below $10. At present, some key investors have begun to reduce their stakes, including major automotive supplier Bosch Group and South Korea's energy and financial services group Hanwha Corporation.

In addition, Milton has sold $300 million worth of stock since July. Milton was then sued by the U.S. Securities and Exchange Commission and accused by the U.S. Department of Justice of making false statements. Nikolai said he would seek compensation from Milton for costs and losses due to the government investigation.

Milton claimed to be innocent and demanded that the charges be dropped. According to Bloomberg, Milton remains Nikolai's largest single shareholder and holds shares through the T&M Residual entity he co-owns with Russell. Nikolai has said that T&M stock managed by Russell has nothing to do with the company. (Compiled by Jiang Zhiwen, China Economic Network)