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Why EV Stock Nikola Sank in November

By Neha Chamaria – Dec 9, 2021 at 11:51AM

Key Points

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Nikola announced a delivery timeline for its first electric semitrucks, but investors still aren't convinced.

What happened

In November, a month when most electric vehicle (EV) stocks rallied to sky-high valuations, shares of Nikola (NKLA 4.17%) tumbled 13.4%, according to data provided by S&P Global Market Intelligence.

The only release from Nikola last month was its third-quarter earnings, and while its numbers didn't reveal much, other crucial updates caught the market's attention and drove Nikola shares higher. The stock, though, failed to hold on to its initial gains as the month progressed. Here's what happened.

So what

During its Q3 earnings release, Nikola's CEO Mark Russell revealed the company's Tre BEV (battery-electric vehicle) was being tested on public roads and that Nikola had begun building pre-series trucks at its plant in Coolidge, Arizona, while expanding the facility's production capacity.

A distressed person sitting in a car.

Image source: Getty Images.

Importantly, Nikola said it expected to deliver up to 25 BEVs by the end of 2021. It also said it was in talks with the U.S. Securities and Exchange Commission (SEC) to end the ongoing probe on the company and was also seeking a reimbursement from its founder Trevor Milton for costs and damages related to the investigations. Milton was indicted some months ago for fraud, including for making deceptive claims and statements about Nikola's semitrucks.

November's updates, therefore, including news that the company is nearing delivery of its first trucks, were enough to make investors overlook Nikola's losses and drive the stock to highs not seen since July.

The euphoria didn't last long, though, as some shareholders saw an opportunity to book profits even in the short early-November run-up in Nikola shares.

Now what

Milton's fraud, undeniably, put Nikola in hot soup even before the company could start building on its EV dreams. Nikola may have already stated that Milton hasn't had any say in the company's affairs since he resigned in September 2020, but the damage caused was so severe that investors are still not convinced about Nikola's prospects, especially with competition intensifying in the EV space. As things stand now, Nikola shares may not have a chance to hop back on investors' radar until it officially delivers its first batch of electric pickup trucks. An end to the SEC probe, though, could be an equally big trigger for the stock.

Neha Chamaria 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.

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