Please ensure Javascript is enabled for purposes of website accessibility

Why Nikola Stock Dropped 18% Today

By Howard Smith - Jan 28, 2021 at 1:12PM

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

Several things have driven the stock up 45%, and then back down 20%, in just the last week.

What happened

After jumping 11% on Wednesday, and almost 38% just since Monday's closing price, shares of Nikola (NKLA -0.84%) are giving some of those gains back today. As of 1:55 p.m. EST, shares were down 17.5% on the day. 

Why the wild three-day ride? Several factors are likely contributing. 

So what

On Monday night, President Joe Biden signed a "Buy America" executive order, and highlighted his support for electric vehicles at the same time. Biden specifically said, "The federal government also owns an enormous fleet of vehicles, which we're going to replace with clean electric vehicles made right here in America, by American workers."

Nikola Two and Tre semi trucks

Nikola Two and Tre semi trucks. Image source: Nikola.

Shares of Nikola and other U.S. electric vehicle makers surged on that comment Tuesday. Yesterday, General Motors (GM 1.35%) announced a hydrogen fuel cell supply agreement with Navistar (NAV) for semitrucks. Nikola stock jumped yesterday, and it could have been due to support for hydrogen-fueled semitrucks this agreement implies.

Or perhaps it was caught up in the wild short squeeze trading. As of mid-January Nikola had about 35% of its float held short, according to MarketWatch. Today, however, Nikola is giving back those gains. 

Now what

While the GM news may support the relevance of Nikola's plans for hydrogen-fueled semitrucks, it had to be painful for Nikola management. A well-publicized potential agreement between Nikola and GM fizzled in size late last year when Nikola's credibility came into question. 

The new agreement between GM and Navistar certainly creates a strong and established competitor for Nikola's planned vehicles. Investors today may be questioning if there is enough room for both, assuming the technology even emerges as an efficient alternative to battery-electric vehicles. 

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

Nikola Corporation Stock Quote
Nikola Corporation
$4.72 (-0.84%) $0.04
General Motors Company Stock Quote
General Motors Company
$32.19 (1.35%) $0.43
Navistar International Corporation Stock Quote
Navistar International Corporation

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

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.