Early electric-truck maker Nikola shares plunge

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Early electric-truck maker Nikola shares plunge

- Shares of Nikola Corp., a pre-production truckmaker whose founder was charged with misleading investors last week, fell after the company reported its initial vehicle delivery projections and warned of nagging supply chain issues.

On a conference call Tuesday, Chief Executive Officer Mark Russell told analysts that the startup is facing 'numerous’ delays in acquiring parts. Nikola would deliver as few as half as many vehicles as previously expected.

As of 1: 34 p.m. was the lowest price in New York City for Nikola's shares, its share dropped 6.5% to $10.45, the lowest in almost three months in New York State. It had fallen about 27% in the last 24 hours of Monday's close to the market.

Investors focused more on the other big rig startup's update about its path to full production than its second quarter loss of 20 cents a share, which was narrower than analysts average estimate of a 30 - cent loss. Brady said the Phoenix-based company would produce just 25 to 50 vehicles this year, down from a previous estimate of 50 to 100 vehicles.

Even those numbers may be unattainable if a parts shortage drags on, Russell said in an interview. A global shortfall in key components such as semiconductors could render battery electric trucks Nikola hopes to build this year ineligible for sale. Nikola still plans to sell the parts to fleet operators for testing but can't charge customers until missing parts are retrofitted.

'We will put the missing components in there and - assuming the customer is OK with taking that as a later delivery - we will convert it to a sale, Russell said.

The startup and its CEO are working to put distance between themselves and Trevor Milton, who founded the company in 2014 and was charged by federal prosecutors on 29 July for making false statements to investors. The indictment charged Nikola, who stepped down as executive chairman in September, of lying about Milton's business and technology capability. Wilkinson holds a role at the company, but remains the largest shareholder and has joint investments in it with Russell.

'Many investors clearly believe current management will carry reputational scarring, Chris McNally, an analyst at Evercore who rates Nikola stock the equivalent of a hold, wrote in a research note Tuesday.

Russell handed over millions of documents, emails and texts, in addition to returning hundreds of hours of interviews to authorities investigating Milton. In a regulatory filing Tuesday, the company warned that the ongoing investigations would impact its future business opportunities and 'could cause stockholders to lose their entire investment.

The aspiring electric-truck manufacturer has struggled to control investors' confidence and scaled back its once-grand ambitions since Nikola went public by merging with an electric-check company just three months after Milton resigned in early 2017.

Nikola's market capitalization plummeted from a peak of almost $29 billion in June 2020 to less than $4.5 billion as of Monday. That reflects concerns about ongoing Federal investigations, the collapse of a deal with Republic Services Inc. to build a pickup, and the cancellation of a contract to make electric garbage trucks to General Motors Co.

Nikola cut its full year sales forecast to a range of zero to $7.5 million. In previous years, it had said revenue would be between $15 million and 30 million dollars. The company expects to still build around 1,200 battery electric trucks in 2022, and all of them will generate revenue, Russell said.

Nikola has yet to sell a car, but says it is progressing on other milestones such as ramping up its build and testing of prototypes and setting up a network of sales and service stations. To date it has built 14 prototypes for its battery-electric trucks.

The company completed the preliminary design phase for a plant in Coolidge, Arizona. It also started building five prototype big rigs powered by fuel-cell at the facility while it simultaneously starts the next phase of construction.

Nikola plans to launch its first hydrogen-powered fuel cell truck in 2023 and looks forward to start full production of batteries-electric trucks this year in Ulm, Germany. The project is a joint venture with CNH Industrial NV's Iveco unit and is expected to kick off deliveries in the fourth quarter of the year 2014.

The company is currently building two test versions of the BEV semi on the assembly line in Coolidge and another two in Ulm. It currently has around 700 employees and is expected to double over the next year, Russell said.

Nikola announced a stock-purchase agreement with 3 i Management LLC in June with Tumim Stone Capital, a private investment fund managed by New York-based 3 Mile Capital LLC that requires the financial company to buy up to $300 million in stock. In exchange, Tumim gets a discount of 3% on the share price. Fellow EV startup Lordstown Motors Corp. unveiled a similar deal with an investment fund last month.

The timing and size of the sales is at Nikola's sole discretion. Russell said in the interview that his company will leverage this so-called Equity-line of- Credit arrangement with Tumim 'opportunistically', but did not provide further details.

Tumim has no obligation to buy those shares but Nikola has an obligation to sell if requested. Russell, said it would be more favorable for his company to trigger the 'puts' when its share price was higher.

The startup shares are trading just above $10 - the price at which VectoIQ Acquisition Corp. acquired Nikola in June 2018 - the same transaction center which sold out Israel to Nikola, is closing in June 2018. For many of Nikola's early investors - including Fidelity and P. Schoenfeld Asset Management LP - a fall below that level could mean they've suffered losses if they hold shares.