Electric vehicle (EV) producer Nikola (NASDAQ:NKLA) is surging today on exciting news. Shareholders of NKLA stock have voted to approve Proposal 2. As noted in a statement released by the company, “this proposal will allow Nikola to increase the number of authorized shares from 600 million to 800 million.”
Nikola chairman and CEO Trevor Milton voted against the motion at the June 1 shareholders meeting. The proposal failed to gain the support it needed to pass at two meetings since then. But yesterday, it received the necessary shareholder votes to move forward. NKLA stock shot up this morning and despite displaying some volatility, it remains in the green by 3%.
What’s Happening With NKLA Stock
While NKLA stock has enjoyed an excellent month, it has spent most of this quarter trending downward. When Proposal 2 failed to pass on June 29, shares fell to all-time low prices, dipping below $5 apiece. As InvestorPlace contributor Bret Kenwell reported, Milton, the company’s largest shareholder, had little incentive to support it. The issuing of new stock would dilute his holdings. “Milton’s vote may not be in the best interest of the company or its shareholders,” Kenwell noted.
Given the support the proposal received on Aug. 2, it seems many NKLA stock holders agreed with Kenwell’s assessment. Current CEO Mark Russell made it clear that he supports the decision. As he stated:
“We are grateful for the support of Nikola’s enthusiastic, diverse stockholder base, and the dedication of the diligent Nikola team who has continued to deliver for our customers as we worked to ensure we have more flexibility to drive Nikola’s continued growth. We’re excited about the strong momentum we have generated heading into this critical period as we move forward on the production and delivery of battery-electric and hydrogen fuel cell trucks and the energy infrastructure to support them.”
It’s true Nikola has given investors more reason to be optimistic about its growth prospects lately. It recently acquired EV battery producer Romeo Power (NYSE:RMO) in a deal worth $144 billion. Both stocks have risen since then as a result. Additionally, the partnership promises to help Nikola streamline production in the months to come.
What It Means
With demand for EVs rising, partnerships like this are of increasing important as automakers look to secure market share. The market for the type of heavy duty EVs that Nikola produces isn’t oversaturated yet. This means NKLA stock has plenty of growth potential if the company can continue scaling production. Nikola has made it clear it has no intentions of slowing down.
The passing of Proposal 2 is an excellent step forward. As Al Root of Barron’s reports, it “clears the way for the company to raise $200 million in needed capital.” If sales of the newly issued shares do yield that type of cash influx for Nikola, the company will be well-positioned to keep growing. It is not to late for the small company to establish itself as a leader in the EV trucking space. NKLA stock is definitely a name to watch for investors seeking bullish plays on the EV sector.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.