Why Nikola Stock Dropped Today

What happened

Shares of battery-electric (BEV) and fuel cell-electric vehicle (FCEV) maker Nikola (NKLA +0.00%) are under pressure Tuesday after the company filed to sell shares to raise $100 million in new capital. As of 10:45 a.m. EDT, shares were down about 7%. 

So what

Nikola is in the process of commissioning prototype vehicles at its Arizona manufacturing plant. The company said in an SEC filing that proceeds from the share sale may be used "to complete our Arizona manufacturing facility, develop commercial scale BEV and FCEV Class 8 trucks and develop hydrogen station infrastructure." 

Image source: Nikola.

Now what

In the recent filing, Nikola reiterated its development timeline, including Phase 1 production of up to 5,000 units per year beginning with commissioning and start-up in the first quarter of 2022. 

The company said it constructed its first five prototype BEV trucks in Germany in the fourth quarter of 2020, and four are currently at its Arizona facility "undergoing powertrain, durability, and extreme weather testing."

Though focusing on its battery-powered vehicles initially, the long-term thesis for investors is to include hydrogen fuel cell trucks. Nikola says it plans for its hydrogen fueling stations "to generate substantial revenue and cash flow, which can be used to fund the development of future stations." The company plans to develop a hydrogen fueling corridor in California, initially building up to approximately 10 stations in the state, meant to supply fuel for launch customers. 

Nikola's plans remain very speculative, and investors should plan for potential failure as well as success. Today's capital raise may not be the final one before the company begins generating revenue.