Nikola on brink of bankruptcy as shares plummet 20pc amid cash woes

ARIZONA: Electric truck manufacturer Nikola is reportedly close to filing for bankruptcy, as per a Wall Street Journal article citing insiders. Following the news, the company’s stock plummeted by 20 percent to 60 cents in after-hours trading.

Based in Phoenix, Arizona, Nikola is currently collaborating with law firm Pillsbury Winthrop Shaw Pittman to evaluate alternatives, including the potential sale or restructuring of the business within a bankruptcy framework. Last month, Bloomberg News indicated that Nikola was considering selling parts of its operations or the entire company.

The company’s financial situation has deteriorated significantly, with cash and cash equivalents dropping to $198.3 million at the end of September, down from $464.7 million at the close of 2023. Since going public in 2020, Nikola’s shares have depreciated by over 99 percent. The stock has dipped below the $1 mark multiple times, leading Nikola to implement several reverse stock splits to maintain compliance with Nasdaq listing requirements.

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Nikola’s turbulent journey since its initial public offering in 2020—completed via a special purpose acquisition company—has seen it become a favorite among retail investors, only for the stock to crash later on. The company has also gone through numerous leadership changes following the resignation of founder Trevor Milton, who was convicted of defrauding investors with false claims about the company’s technological advancements.

The company’s financial woes are partly attributed to complications with its electric big-rig trucks, which were recalled in 2023 after engine fires halted sales. Additionally, Nikola has experienced sluggish sales, moving only about 200 of its hydrogen-electric semi-trucks in the first nine months of 2024. While the company indicated in October that it had enough cash to meet obligations through the first quarter, it expected difficulties beyond that period. CEO Steve Girsky mentioned during an investor call that Nikola was “actively talking to lots of potential partners who value what we do and what we’ve built.”

To enhance its financial situation, Nikola has pursued various strategies, including multiple rounds of layoffs. In December, the company filed for permission to sell up to $100 million in stock.