Nikola Corporation, the US-based hydrogen and battery electric truck manufacturer, is grappling with significant financial challenges, as evidenced by its recent decision to undertake a drastic 1-for-30 reverse stock split. This decision comes in a bid to avoid being delisted from the Nasdaq stock exchange, following a prolonged period of trading below the $1 threshold. As of the latest trading session, Nikola’s share price hit an all-time low of $0.33.
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The reverse stock split, approved by Nikola’s board and announced during the trading week, is set to take effect at the market close on Monday. This move is part of a broader strategy to stabilize the company’s stock price and maintain its listing status on Nasdaq, which requires maintaining a minimum share price of $1. If a company’s stock price falls below this level for 30 consecutive trading days, it risks receiving a delisting notice, which Nikola received in January.
Despite previous attempts to rejuvenate its stock value, Nikola’s financial performance has continued to deteriorate, with the company posting net losses of $966 million in 2023 and a cumulative deficit of $3.2 billion since its inception in 2014. The company’s recent quarterly results showed a net loss of $147.7 million in Q1 2024, despite a more than 15% reduction in operating expenses. Revenue has also declined, with only $7.5 million reported in the first quarter of 2024, down from $10.7 million during the same period the previous year.
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The board’s decision to implement the most aggressive reverse stock split option suggests a lack of confidence in the stock price recovering on its own. This sentiment is shared by investors and analysts, with the investment website Motley Fool describing the move as a “grim decision.” This sentiment was further exacerbated by market reactions to the bankruptcy filing of electric vehicle startup Fisker earlier in the week, which likely contributed to the sharp decline in Nikola’s stock price.
Nikola’s strategic response to its financial woes includes continuing its operations in the production and sale of hydrogen fuel cell trucks, albeit at a significant loss. The trucks are being sold for almost half of what they cost to manufacture, highlighting the severe financial inefficiencies the company faces.
As Nikola navigates these turbulent financial waters, the company’s future remains uncertain. The upcoming implementation of the reverse stock split is seen as a critical step for the company to regain stability and confidence from its stakeholders and the broader market. However, whether this strategy will suffice to turn around its fortunes remains to be seen, as Nikola continues to struggle with the fundamental challenges of profitability and market competitiveness.
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