The premise of this article is simple: Nikola (NKLA) is one of this century’s greatest speculative / trading stocks. While I find it incredibly unlikely the company will ever be worth today’s share price, there is a backdoor way to play NKLA that will likely outperform the market regardless of how NKLA’s stock performs over the next few years.
That backdoor play? Worthington (NYSE:WOR). The background is simple: WOR made an incredible venture investment into Nikola a few years ago (a $2m in 2015 which has today become >19m shares currently valued at more than a billion dollars). At today’s prices, the market is basically offering you WOR’s core business for a fair price and throwing in the NKLA investment, currently worth ~$1B (~50% of WOR’s market cap) for free.
Why does this opportunity exist? Any number of reasons could explain the divergence. For example, maybe I’m too optimistic on the WOR core business, and the market is pricing in the WOR business as worth substantially less than I believe it is while valuing the NKLA investment properly. Perhaps the market for WOR is a bit ineffecient: it’s a smaller company with somewhat complicated accounting and a limited float, and the NKLA investment hasn’t hit their balance sheet yet (it will when they report their next quarter). Or perhaps most WOR investors believe that NKLA is a bubble and are assigning little to no value to WOR’s NKLA shares because they believe WOR will be unable to sell their shares at anything close to today’s prices.
My personal belief is a combination of #2 (limited float, inefficient market) and #3 (WOR investors believe that NKLA is a bubble and WOR won’t realize value close to today’s prices). But honestly, it doesn’t much matter for an investment in WOR today. My personal belief is that, even if WOR’s NKLA investment is
