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Why Nikola Stock Popped by Nearly 5% Today

By Eric Volkman – Oct 19, 2021 at 6:24PM

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The company's legal action against Tesla will go forward after all.

What happened

Shares of specialty electric vehicle (EV) and alt-fuel auto maker Nikola (NKLA -4.36%) accelerated by 4.7% on Wednesday, blasting past both major stock indexes and many other EV titles. This followed some intriguing news on the legal front for the manufacturer of next-generation trucks.

So what

Judge James Donato of the United States District Court for the Northern District of California issued a fresh order in a lawsuit Nikola filed in 2018 against fellow EV maker Tesla (TSLA 2.52%). The judge is allowing the case to go forward, after Nikola responded to an earlier ruling that the company show cause as to why it should continue.

Gavel atop a pile of money.

Image source: Getty Images.

The company did so, and as a result Donato's new order stipulates that the case will not be dismissed. The judge has also set dates for a technology tutorial (Jan. 13, 2022) and a claim construction hearing (Jan. 27 of the same year) for the suit.

Nikola originally filed its lawsuit in 2018, alleging that Tesla had infringed its patents on a hydrogen powered semi-truck for its own Semi model. By doing this it is allegedly generating "confusion in the market," and effectively costing Nikola over $2 billion in lost sales.

When news of the lawsuit originally broke, in an apparent play on words Tesla said it was "patently obvious there is no merit," to the allegations.

Now what

Neither Nikola nor Tesla has yet commented on the latest developments in the suit. Enmeshed in scandals seemingly of its own making, Nikola has not pursued the case vigorously since filing it, and it doesn't seem like a priority. While investors in both companies should watch how the Nikola/Tesla legal proceedings unfold, they shouldn't take action in their investment solely because of them.

Eric Volkman 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.

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