Please ensure Javascript is enabled for purposes of website accessibility

Why VectoIQ Stock Popped 12% This Morning

By Rich Smith - Mar 3, 2020 at 10:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's a reverse merger!

What happened

You probably haven't ever heard of VectoIQ Acquisition Corp. (VTIQ) before -- and that's OK.

Up until now, VectoIQ has been just what the name implies -- a company that does nothing, and earns nothing, and that was created for the sole purpose of acquiring some other company that does do something (and ideally, that does earn something).

Today, VectoIQ will finally fulfill its purpose, as it announces the acquisition of privately held, Utah-based Nikola Corporation -- and sees its stock rise 12.4% (through 9:50 a.m. EST) in response.  

Nikola One electric semi.

Image source: Nikola Corporation.

So what

Of course, you probably haven't ever heard of Nikola Corporation either -- and that, too, is OK. It's privately held, after all, and not yet well known. But we should still try to fix that.

As the companies explain, Nikola was formed to develop a family of battery-electric vehicles (BEV) and hydrogen fuel-cell electric vehicles (FCEV) for sale to green-focused transportation companies, and to develop "a hydrogen station infrastructure to support its FCEV vehicles." In particular, Nikola wants to make electric "class 8 semi-trucks" that might compete with the electric semi truck that Tesla (TSLA 2.55%) announced in 2017 (but still hasn't begun selling).

VectoIQ and Nikola say their merger will be effected in Q2 2020 at a "pro forma enterprise value" of about $3.3 billion. It's unknown how many shares that value will be divided up among, but when the company first begins trading on the Nasdaq under ticker symbol "NKLA," its share price should be around $10, the price at which Nikola plans to run a "$525 million private placement of common stock."

Now what

Nikola isn't making much money right now, and VectoIQ isn't making any either, but together, they say they have "more than 14,000 pre-orders" on the books already, "representing more than $10 billion in potential revenue and two-and-a-half years of production" work.

Revenues will begin rolling in 2021 with the introduction of the company's "BEV truck," followed by sales of the "FCEV truck" in 2023.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

VectoIQ Acquisition Corp. Stock Quote
VectoIQ Acquisition Corp.
VTIQ
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$699.20 (2.55%) $17.41

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.