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Is Nikola Running Out Of Power?

Jun. 10, 2020 8:12 PM ETNikola Corporation (NKLA)CNHI, TSLA57 Comments
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Small Cap Reporter


  • Nikola is the new high-flyer in EV and Tech; the hype may be the only thing in the driver's seat right now.
  • Despite negative sentiment, there are prospects that could lead to success if Nikola can capitalize.
  • The current state of the company doesn't necessarily suggest near-term revenue, while its Anheuser-Busch deal hype relies heavily on reservations that are open-ended.

The Epic Climb Of NKLA Stock Raises More Questions; Is It Just An Overpriced Penny Stock?

Penny stocks are typically considered equities trading below $5. When you first look at Nikola Corporation (NASDAQ:NKLA), you might be wondering how it would remotely be related. Let me be first to say that in no way am I saying NKLA is a penny stock.

Based on what's publicly available, specifically within the company's own financials, the statements used are akin to a start-up company; not one worth over $1 billion.

NKLA Stock Price

If you haven't heard about Nikola quite yet, let's go over some of the basics. The company went public after a combination with VectoIQ Acquisition Corp. (f/k/a VTIQ). The whole purpose behind Vecto, in its own words, was "for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization or other similar business combination with one or more businesses."

Nikola Corp. Goes Public

Essentially, we're talking about a "blank check" company already. As I'm sure many of the experienced traders reading will agree, blank check companies are typically found on the OTC in many cases. Instead of doing a traditional public offering, Nikola agreed on March 3rd to merge with VTIQ. It also raised over $700 million from investors. On top of this, some of the details of a simple PIPE transaction or "private investment in public equity" show something else.

Buyers were able to get shares in the special purpose company (VTIQ) for $10. PIPE investors included BlackRock, Fidelity Investments, and ValueAct Capital who purchased 50 million shares of VectoIQ. Those shares converted to Nikola shares on June 4.

Given the fact that shares weren't much higher than $13 at the time, a 30% discount might have not seemed "that bad". But, again, it's something we see a lot of when it comes to penny stocks

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