Please ensure Javascript is enabled for purposes of website accessibility

Why Nikola and Workhorse Group Stocks Are Down Today

By John Rosevear – Updated Sep 2, 2020 at 3:39PM

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

As is often the case, it seems to be all about Tesla.

What happened 

Shares of electric-truck makers Workhorse Group (WKHS -3.24%) and Nikola (NKLA -3.35%) were both trading lower on Wednesday after a longtime investor in Tesla (TSLA 0.03%) said that it had reduced its stake in the electric-vehicle giant. 

As of 2:30 p.m. EDT, Workhorse's shares were down about 6.7%, and Nikola's down about 4.1%, from Tuesday's closing prices.

So what

Tesla's shares fell sharply on Wednesday morning after investment management firm Baillie Gifford, the largest institutional Tesla shareholder and a longtime supporter of the company, said that it had reduced its stake in the company from about 6.3% to below 5%.

A silver Nikola Badger, a brawny electric pickup truck.

Nikola is expected to announce a manufacturing partner for its Badger pickup truck soon. But what if the electric-vehicle bubble pops before then? Image source: Nikola.

In a statement, Baillie Gifford fund manager James Anderson said that the move was for portfolio-management reasons (after Tesla's huge gains in 2020, Baillie Gifford's stake had grown too big) rather than because of a change of heart about the company. 

Still, investors seemed concerned about the news. Tesla's shares were down over 14% early on Wednesday before recovering some ground. (Tesla's stock was down about 6.7% from Tuesday's close as of 2:30 p.m. EDT.) 

It was likely those concerns dragged down the stock prices of several more speculative electric-vehicle companies, including both Workhorse and Nikola. 

Now what

Given that Tesla's stock price has increased roughly tenfold over the last year, it's no surprise to see some selling pressure surface. Even longtime Tesla bulls (like my Foolish colleague Daniel Sparks) have conceded that the company's current valuation is increasingly hard to justify. 

The recent share-price gains for both Workhorse and Nikola are due at least in part to auto investors' excitement following Tesla's impressive run. But those gains have always been at risk: If Tesla's run falters, or its stock price falls sharply, that investor excitement -- and the prices of Nikola, Workhorse, and other electric-vehicle stocks -- could fall as well. 

While both Workhorse and Nikola have promising growth plans, the risks in the near term are significant. Invest accordingly. 

John Rosevear has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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

Workhorse Group Stock Quote
Workhorse Group
WKHS
$2.09 (-3.24%) $0.07
Nikola Corporation Stock Quote
Nikola Corporation
NKLA
$2.31 (-3.35%) $0.08
Tesla Stock Quote
Tesla
TSLA
$182.92 (0.03%) $0.06

*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
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/28/2022.

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.