Delays, cash shortage plague truck-maker Nikola

Nikola Corp. entered this year with ambitions to start full production of a batterypowered semi-truck, make progress on a fuel-cell big rig and break ground on a network of hydrogen fueling stations.

It’s going into 2022 with those and other objectives incomplete — and a shrinking cash pile to make them happen.

One of the first of a series of electric vehicle startups to gain a public listing by merging with a blank-check company, the once high-flying stock is mired at less than the special purpose acquisition company’s $10-a-share offering price three years ago.

Nikola’s been stuck in neutral since last year, when its founder resigned under a cloud of fraud allegations, General Motors pulled away from a partnership and it lost a key truck supply contract. Efforts to rebuild trust with investors have been hurt by repeated production delays.

While the company says it has access to plenty of funds — including an obscure financing tool to raise more money if needed — Nikola has burned through one-third of its cash on hand over the past 12 months as it tinkers with its batterypowered trucks.

Those vehicles won’t be ready for commercial sales until early next year, even as the company steps up spending on them and a separate initiative to develop hydrogen-powered semis that today exist only as prototypes.

“Given the challenges, they have limited options,” Dan Ives, an analyst at Wedbush Securities with a neutral rating on the stock, said in an interview. “They will have more options to tap capital in private or public markets” only if the company is able to meet its nearterm production goals, he said.

Delivery targets for its debut Tre electric semi have been pushed back twice this year and Nikola now plans to produce up to 25 trucks by year end. It delivered the first two last week. But those won’t generate immediate revenue because they are preproduction vehicles, built without key parts in short supply such as semiconductors.

Nikola’s 2020 merger with the special purpose acquisition company gave it a cash injection of more than $900 million. Riding high following the listing and bold predictions for success by its outspoken founder and then-chief executive officer, Trevor Milton, Nikola’s market capitalization at one point exceeded Ford.

At the time of its merger, Nikola and Milton vowed to revolutionize the world of commercial vehicles with long-haul trucks that ran on hydrogen and a nationwide network of fueling stations. But by September of last year, Milton left amid federal regulatory investigations examining claims he’d exaggerated the company’s progress and misled investors.

Nikola is eager to close that chapter after reaching a deal with the government over those claims. The company agreed on Tuesday to pay a $125 million civil penalty to the U.S. Securities and Exchange Commission without admitting or denying wrongdoing.

A settlement allows the company to “leave the past in the past and look ahead,” RBC analyst Joseph Spak, who has a sector perform rating on the stock, wrote in a Nov. 4 note to clients after Nikola disclosed the talks with the SEC.

Nikola’s valuation has plunged to $4 billion and the company forecasts it will end the year with around $350 million in cash remaining on its balance sheet.

The startup says it has access to more capital via an unusual tool: equity lines of credit, reached earlier this year with a little-known financier.

The equity lines give Nikola the right to demand New York-based Tumim Stone Capital buy shares at a time of the startup’s choosing at the market price minus 3%.

Nikola can draw on the line only in installments, which are capped. To date it has called on $72.9 million, leaving a remainder of $527.1 million.

“We believe this will provide ample liquidity for Nikola to fund our stated operational milestones through the end of 2022,” Chief Executive Officer Mark Russell, who succeeded Milton, said in a statement.

An equity line of credit is not a new financing instrument, but it isn’t widely used. Typically it’s a tool of last resort when more common forms of fund raising aren’t available.