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NKLA Stock: Why Nikola Shares Are Plunging This Morning

It looks like beleaguered Nikola (NASDAQ:NKLA) can not catch a break, as NKLA stock slumped as much as 10% this morning after announcing it parted ways with Republic Services (NYSE:RSG) on a collaboration to develop electric garbage trucks.

Nikola Stock: Image on phone screen
Source: Stephanie L Sanchez / Shutterstock.com

The order for 2,500 of the EV dumpsters was originally signed in August. That news rocketed NKLA stock up by 22% on Aug. 10. But today, investors are learning the red-hot deal has come to an end. Why? Well, Nikola said the decision was made after both companies determined it would “result in longer than expected development time, and unexpected costs.”

NKLA Stock Gets ‘Gut Punch’

In a note this morning to clients, Wedbush analysts Daniel Ives and Strecker Backe wrote that the break-up with Republic “is a ‘gut punch’ for investors that were hoping this monster order was a potential paradigm changer for Nikola and reference customer going forward.”

“We note that this was the single largest order in the waste industry and indicated the continuing and building commitment to zero emission trucks as these vehicles were expected to outperform diesel or natural gas potions in both horsepower and torque,” the analysts wrote.

Citing that Nikola has a “Kilimanjaro-like” uphill climb to regain credibility in 2021, they maintained their “underperform” rating on NKLA stock.

Management Missteps

Life hasn’t been easy for NKLA stock investors. While the company attracted billions of dollars in investment, the actions of management have raised some questions.

It holds significant promise as a developer of electric and hydrogen concept vehicles. Yet, it seems that for every step forward, it takes two backward.

One was the collapse of a deal where legacy automaker General Motors (NYSE:GM) was going to acquire an 11% percent stake in Nikola and manufacture its Badger pickup. News of the preliminary agreement fueled a rise in Nikola shares. Conversely, confirmation of the rumored collapse sent shares down.

Then, the company got in trouble for making a demonstration vehicle look like it was running on its own power when it wasn’t. And short seller Hindenburg accused the company of lying about other matters.

Then there was the September resignation of company founder and former CEO Trevor Milton following fraud allegations.

Just when it seemed like it couldn’t get worse, Milton became the center of controversy after he was accused of sexual misconduct by two women. The women said they were teens when the incidents occurred in Utah. Milton has since denied the misconduct claims.

What to Do From Here

Prior to today’s Republic news, InvestorPlace contributors saw some potential in NKLA stock. Those opinions may change in the coming days.

A troublesome founder is one thing. The loss of a benchmark contract and customer, that’s another. And it may be a while before the EV maker can get back on track and instill even a semblance of confidence in investors.

On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, following fintech, agtech and property tech startups.

Article printed from InvestorPlace Media, https://investorplace.com/2020/12/nkla-stock-why-nikola-shares-are-plunging-this-morning/.

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