What happened
While much of the electric-vehicle (EV) investing world was focusing on Rivian Automotive and Lucid Group last week, the stock of start-up Nikola (NKLA 0.71%) steadily declined. That continued today, bringing the five-day drop to almost 20%. After dipping more than 8% earlier Monday, shares of Nikola remained down 5.4% as of 3:38 p.m. ET.
So what
Many investors were focused on EV names last week after Rivian made its public debut. The company now sports a valuation higher than many established U.S. automakers, even prior to it bringing in any meaningful revenue. Over the days subsequent to that large initial public offering (IPO), many EV stocks, including Nikola, surged. But on Nov. 16, 2021, Nikola filed a statement saying a shareholder was selling a large block of shares after the stock had run up to over $13.50 per share.
Nikola battery-electric semi-truck tractor. Image source: Nikola.
The company reported that Tumim Stone Capital was selling shares that were part of a $600 million stock-purchase agreement between Tumim and Nikola announced in September. That purchase agreement brought new liquidity to Nikola, and Tumim is now cashing out some of that investment after the stock jumped.
Now what
Nikola won't receive any proceeds from this sale as the purchase agreement with Tumim included its ability to sell its shares at various times and various prices. Tumim's initial investments were made when Nikola shares traded near the range of $10 to $12 per share.
At the time, Nikola CEO Mark Russell said in a statement:
We believe this will provide ample liquidity for Nikola to fund our stated operational milestones through the end of 2022, which include the commercial delivery of BEV [battery electric vehicle] trucks as well as the start of road release and pilot testing of FCEV [fuel cell electric vehicle] trucks.
The shares sold to Tumim did dilute existing shareholders' ownership percentage when they were issued for the capital raise. But the recent sale doesn't change anything for current shareholders. However, some may be following the investment group in taking advantage of a recent share surge.
