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Why Nikola Corporation Stock Popped 6% Today

By Rich Smith – Aug 28, 2020 at 3:08PM

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Nikola's founder moves to secure loyalty in the face of a falling stock price.

What happened

For the second day in a row, Nikola (NKLA 0.42%) stock is on the rise, gaining 6.1% through 2:15 p.m. EDT Friday.

And for the second day in a row, I think investors are reacting to founder Trevor Milton's tweet promising to share the wealth of his popular electric truck company more widely with his employees.

Nikola One semi truck bearing US Express logo.

Image source: Nikola Corporation.

So what

As you've probably heard by now, Milton tweeted out his intentions yesterday to distribute 6 million shares of the electric truck maker, currently sitting in his own personal stock portfolio, and hand them over to the first 50 or so of his company's employees.

Milton can certainly afford it. Owning 35% of Nikola stock at present, Trevor Milton's net worth sits somewhere north of $5 billion. Giving out 6 million shares, worth just under $250 million presently, will only diminish his personal wealth by 5%.

Now what

And taking that haircut to net worth could be a smart business move. It doesn't hurt Milton's pocketbook as much as it would have if he had handed out the shares back in June, for example, when they were just coming off a successful reverse-merger IPO, worth twice as much as they are today.

More importantly, sharing the wealth today could help to attach "golden handcuffs" to his most important employees -- specialists whom rivals might find easier to poach now that Nikola's stock price has been cut in half, and some of the bloom is off the rose, so to speak.

So long as those shares remain under "lockup" restrictions and can't be immediately converted to cash, their recipients will be more likely to hang around and help turn Nikola into the success story its shareholders hope it will become.

Rich Smith 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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