Please ensure Javascript is enabled for purposes of website accessibility

Why Nikola Stock Lost 17% Last Month

By Jeremy Bowman - May 6, 2021 at 9:43AM

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

Investors continue to turn away from SPACs.

What happened

Shares of Nikola (NKLA 2.09%) continued their downward drift last month as the special purpose acquisition company (SPAC) bubble continued to deflate, dragging down the maker of hydrogen and electric vehicles. Nikola's head of fuel cell development stepped down at the beginning of the month, weighing on the stock, but investors did receive some good news when the company said it would begin installing hydrogen fueling stations in California.

According to data from S&P Global Market Intelligence, the EV stock finished April down 17%. As you can see from the chart below, the stock declined for most of the month, before reversing course when the fueling station news broke.

NKLA Chart

NKLA data by YCharts

So what

Nikola has been a poster child for the SPAC boom over the past several months. These are companies taken public by a shell company, many of which would have struggled to go public through a traditional IPO process. Nikola, which went public with no revenue or even a viable product, is a prime example of SPAC bust as the stock has plunged since its peak nearly a year ago. It's been mired in scandals, including that it faked an operational vehicle, which forced the founder to step down. SPACs in general have been getting more scrutiny in recent weeks, and investors seem to think that many are overvalued, built on little more than lofty promises.

A Nikola pickup truck on rocky terrain

Image source: Nikola.

Nikola stock also took a dive on April 7, falling 7%, after Bloomberg reported that the company's executive vice president of technology, hydrogen, and fuel cells had left the company on April 1.

Shares steadily declined through April 20 as Wedbush also slashed its price target from $25 to $13, citing the poor track record in the company's execution thus far. The stock briefly dipped below $10 or the level at which parent company VectoIQ went public in 2018. However, Nikola jumped on April 22 on news that it would team up with TravelCenters of America to install two hydrogen fueling stations in California by 2023. 

Now what

As a prerevenue company, Nikola remains a crapshoot and is likely to be volatile. The stock has already fallen 10% through the first three sessions in May ahead of its first-quarter earnings report. Since the company doesn't have any revenue yet, the report doesn't carry the usual relevance, but it will provide investors with an update on the company's progress. 

After several months of declines, though, the market is clearly skeptical about the stock's prospects.

Jeremy Bowman 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.

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
NKLA
$6.83 (2.09%) $0.14

*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
389%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

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.