Nikola shares down 15% on secondary stock offering: buy the dip?

  • March 31, 2023

Nikola Corp (NASDAQ: NKLA) is trading about 15% down this morning after the electric vehicles company sold its stock at a deep discount.

Nikola sold its stock at a 20% discount

On Friday, the Arizona-based company raised $100 million via a secondary stock offering that it plans on deploying as working capital. Nikola sold 90 million shares in total for $1.12 each that translates to a 20% discount versus its previous close.

Even at such a low price, Citigroup – its underwriter managed to place roughly 33% of the shares only with its clients. An anonymous private investor, Nikola confirmed, agreed to buy the rest of them.

The Nasdaq-listed firm ended 2022 with about $233 million in cash and cash equivalents. Nikola shares are down 60% versus their year-to-date high at writing.

BTIG downgraded Nikola shares today

In February, Nikola Corp reported just over $222 million of loss for its fourth financial quarter. For later this year, it has plans of introducing a new, hydrogen fuel cells powered long-range electric semitruck.

Today’s announcement, though, was sufficient to put off a BTIG analyst. Downgrading Nikola shares to “neutral” on Friday, Gregory Lewis said in a research note:

Key to longer-term growth of the hydrogen business will be partnerships to secure hydrogen molecules and the buildout of its refueling infrastructure, as the company expands its H2 station footprint to 60 by 2026.

He agreed that the capital raise will help in the near term but emphasized the need to lower burn to avoid another cash injection in the future.

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