What happened
Investors are clearly not happy with last night's news from electric heavy truck start-up Nikola (NKLA -2.44%). It shouldn't have come as a surprise that the company needed to raise fresh capital. But the terms of the latest capital raise had shares plummeting as much as 16.4% Friday morning. As of 10:35 a.m. ET, the stock was trading down 11.8% for the day.
So what
That's because Nikola announced the pricing of a new stock offering to raise $100 million in fresh capital as it ramps up production of both its battery- and hydrogen fuel cell-electric Class 8 heavy trucks. The offering at $1.12 per share is well below yesterday's closing price of $1.40 per share.
But what really has investors spooked is that the shares are being offered at about half what the stock was worth just one month ago. That makes the company look desperate for the capital.
Image source: Nikola.
Now what
Last August Nikola said in a filing that it may raise up to $400 million including through future stock sales. So last night's news that it is seeking $100 million isn't really a surprise for investors. But the stock was trading at over $5 per share when it made that initial announcement.
The fact that it now wants to raise $100 million in a secondary stock offering to the public at just $1.12 per share either means the company is needing money quickly or has planned its capital needs poorly. It said the money will be used for working capital and general purposes.
Nikola plans to begin deliveries of its hydrogen fuel cell trucks later this year. But it seems it may need money to begin generating revenue from those vehicles. It already is generating sales from its battery electric trucks.
Shareholders don't like dilution in most cases, but the circumstances that have dictated these new share sale plans could mean the company is struggling financially more than most already knew.
