🚚 Double Whammy For Nikola?

A restructured deal with GM and the possibility of insiders glutting the market has pushed Nikola's stock into a tailspin.

Hey Global Investor, here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Wednesday Close) 3,669.01 +6.56 (0.18%)

NASDAQ (Wednesday Close)12,349.37 −5.74 (0.046%)

FTSE 100 (5 PM IST) 6467.13 +3.74 (0.05%)

NIFTY 50 (Today’s Close) 13,136.90 +23.15 (0.18%)

USDINR (5 PM IST) 73.89 (1 Year +2.83%)

Double Whammy For Nikola?

A restructured (watered down) partnership agreement with GM alongside the possibility that insiders can now glut the market with Nikola stock has pushed the company’s stock price in a tailspin.

Background: Back in September, Nikola’s founder Trevor Milton announced a $2B partnership with General Motors. GM would take 11% stake for an in-kind arrangement to manufacture Nikola’s flagship Badger pickup truck and supply the battery and fuel cell technologies.

No sooner than the deal was signed, accusations of fraud and willfully misleading investors were leveled against Nikola. Short-seller Hindenburg Research’s report on Nikola staging the functioning of its truck, and Milton’s misdeeds prompted the DoJ and the SEC to probe the company. Milton stepped down from his executive chairman role on September 21, vowing to fight the allegations.

What Happened? Earlier this week, GM announced it is not taking the 11% stake in Nikola, and wouldn’t manufacture the Badger. It will remain as a partner for now, but with a non-binding MoU until the end of 2021.

Unrelated to this development, the lock-up period, which precluded insider shareholders from selling Nikola shares, expired this week as well. Of the 306.9M outstanding Nikola shares, insiders own 166M, with Milton controlling 91.6M shares.

Milton has disappeared from the public eye since his resignation. His spokesperson declined to comment on whether or not Milton will freely sell his shares, now that the lock-up is no longer a constraint. If the insiders decide to make whatever hay they can while the sun shines, it’ll be sunset time for Nikola’s share price.

Market Reaction: Nikola’s stock price ended at $18.32, up 5.47%, riding on the hope that insiders are not in a hurry to press the self-destruct button just yet. GM not pulling the plug entirely is also seen as a positive.

Company Snapshot 📈

NKLA $18.32 +0.95 (5.47%)

Analyst Rating (6 Analysts) BUY 50%, HOLD 33%, SELL 17%

Newsworthy 📰

  • New Cloud in Town: ServiceNow is emerging as a cloud-software superpower (NOW -2.42%)
  • Get Some Fresh Air: Google has begun allowing employees to hold some meetings outdoors on campus (GOOG +1.66%)
  • “Snow”ing Profits: Snowflake shows 119% revenue growth in first earnings report as a public company (SNOW -4.24%)

Later Today 🕒

  • Before Market Open: Azek Company Inc Earnings (AZEK)
  • Before Market Open: REX American Resources Corp (REX)
  • After Market Close: Science Applications International Corp Earnings (SAIC)
  • After Market Close: Domo Inc Earnings (DOMO)

Fun Fact of The Day 🌞

The word ‘orchestra‘ derives from a Greek phrase meaning ‘dancing place’

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