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Why Nikola Stock Fell, Recovered, and Closed Higher Today

By John Rosevear – Updated Jun 18, 2020 at 5:48PM

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Its founder spoke his mind on Twitter, and a roller coaster ride followed.

What happened

Shares of electric truck maker Nikola (NKLA 1.30%) rebounded to close higher on Thursday, after having been down early in the session following a negative Bloomberg article that led to a lengthy Twitter outburst from Nikola's founder and chairman.

Nikola's shares opened lower on Thursday, but recovered to close in positive territory, up about 5.7% on the day. 

So what

Nikola -- and its loquacious founder and chairman, Trevor Milton -- have had quite a roller coaster ride since the electric big-rig maker went public via a reverse merger earlier this month.

The latest contretemps started shortly before the market closed on Wednesday, when Bloomberg reported that Milton had "exaggerated the capability" of Nikola's first truck, unveiled in 2016. According to Bloomberg, Milton had told the crowd at the December 2016 reveal event that the Nikola One truck was drivable, when it fact it was missing key components and was never driven under its own power. 

That report didn't go over well with Milton, who took to Twitter to respond:  

(You can click through to read the rest of the thread.)

Later in the evening, Milton tweeted a copy of a letter to Bloomberg from Nikola's in-house counsel and said that he planned to sue the company.

The Nikola One, an electric semi truck.

According to a Bloomberg report, the Nikola One, the company's first truck, was inoperable when it was revealed in December 2016. Nikola's founder disputed the report. Image source: Nikola Corporation.

That all didn't sit well with auto investors, who know that (while there have been exceptions) companies run by leaders who bluster and threaten critics tend not to perform well over time. Nikola's shares fell sharply in after-hours trading on Wednesday.

But take note: While Milton may be the online voice of Nikola, he's no longer the company's CEO. He ceded that role to former Worthington Industries president Mark Russell earlier this month and now holds the title of "executive chairman." Put another way, he isn't actually the day-to-day leader of the company he founded anymore.

Now what

So why did Nikola's stock price recover and then close higher on Thursday? I think investors realized that Milton's Twitter bluster doesn't diminish the company's prospects under its new leadership. 

Given that the stock's first Wall Street rating, from Cowen analyst Jeffrey Osborne on Wednesday, was outperform with a $79 price target, I think investors decided to take a deep breath, and a longer view, during Thursday's session.

John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Nikola Corporation Stock Quote
Nikola Corporation
NKLA
$3.90 (1.30%) $0.05
Worthington Industries, Inc. Stock Quote
Worthington Industries, Inc.
WOR
$48.19 (1.52%) $0.72

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