Electric vehicle (EV) dark horse Nikola (NASDAQ:NKLA) stock is down nearly 10% today after announcing a potential $400 million stock sale. The electric truck maker explained that rising costs have forced the company to pursue additional funding as it attempts to expand its manufacturing.
Nikola announced this morning it may look to sell shares in order to combat rising labor and material cots, attributed to inflation and the impact of Russia’s invasion of Ukraine. This month, Nikola earned investor approval to increase its authorized shares from 600 million to 800 million. This represents up to $400 million worth of new shares at market price, currently $5.41 at the time of writing. However, it wasn’t easy convincing shareholders.
The company’s ousted founder, Trevor Milton, publicly opposed further stock offerings. This is likely because of the consequential dilution of his ownership in the company. In fact, Nikola was forced to repeatedly push back its annual shareholder meeting in order to secure more votes in favor of the proposal.
If you recall, Milton was terminated from his own company after the U.S. Securities and Exchange Commission (SEC) began investigations into the then-CEO for fraud. Milton lied to investors over the technological capabilities of the companies in order to secure billions in investments under false pretenses.
Now, it seems Nikola is going about funding the old fashioned way.
NKLA Stock Continues to Tumble
With today’s drop, Nikola only widens its losses this year. NKLA is down an eye-popping 47% this year, following the company’s debilitating scandal in 2021. In its Q2 earnings call, Nikola announced the necessity of additional funding as the company moves ahead with the production of its seminal electric semi-truck. As of June, the company only has $529 million in cash on-hand.
Interestingly, Nikola isn’t the only EV hopeful on the search for funds, lately. Lucid Motors (NASDAQ:LCID), a luxury EV startup, also announced a new stock offering. Like its truck-peer, investors weren’t too keen on the idea. In a filing Monday, Lucid revealed plans to issue roughly $8 billion worth of securities over the next three years. LCID stock immediately fell 6% as industry-wide supply concerns ate away at investor sentiment.
It’s been a difficult time for EV makers lately. Battery costs are rising, EV tax credits are projected to limit EV sales, and inflation continues to eschew many car makers’ respective bottom lines.
On the date of publication, Shrey Dua did not hold (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.
