What happened
Shares of Nikola (NKLA -3.23%) are cratering again Thursday's trading. The electric vehicle company's share price was down roughly 21% as of 3:15 p.m. ET, according to data from S&P Global Market Intelligence.
Nikola sent out a message revealing that it was in danger of being delisted from the Nasdaq stock exchange. The EV company's share price has been trading below the $1 minimum level that is required to trade on the Nasdaq, and it will be taken off the exchange if its price does not climb above that level within 180 days of receiving the notice. Nikola also announced a new fundraising move, but it's one that's clearly not inspiring much investor confidence.
So what
If Nikola were to be delisted from the Nasdaq exchange, it would make its stock less visible and harder to purchase for investors and result in it being removed from index-tracking funds. With the company carrying substantial debt, posting mounting losses, and its business generally in a dire position, selling new stock is one of the few ways it has to raise liquidity. The deadline to vote on the proposal is June 6.
The EV company is urging shareholders to vote for a proposal that would allow it to increase its outstanding share count. This would allow it to raise funds, but it would also have a dilutive effect on current shareholders.
Now what
Nikola's stock now sits down more than 99% from the peak it reached in June 2020. The EV specialist could potentially push its share price above $1 level by conducting a reverse stock split. Such a move would reorganize the company's equity structure, combining a single new share of equivalent combined value.
However, even if Nikola is able to remain on the Nasdaq, it won't do much to address the underlying issues facing the business. The company posted a net loss of roughly $169.1 million in the first quarter, which was up from a loss of roughly $152.9 million in the prior-year period. The company has temporarily paused the production of its battery-powered electric trucks in response to weak demand, and the business has as difficult road ahead.
