What happened
The S&P 500 is off to an auspicious start this week. Shares of Nikola (NKLA 7.23%), however, aren't on the same road. Investors are pumping the brakes on the electric truck manufacturer after news that one of its vehicles caught fire over the weekend.
As of 11:05 a.m. ET on Monday, shares of Nikola had fallen 5.6%, recovering from their earlier decline of 14.8%.
So what
Nikola announced yesterday that a truck at its Phoenix headquarters had caught fire. According to Reuters, the company said: "At approximately 2 pm today at Nikola HQ, one of the trucks that was previously damaged reignited. No one was injured and the fire was quickly contained."
Last month, Nikola reported that several trucks had been damaged in a fire at its headquarters in Phoenix. The company had raised concerns that the fire was a result of arson, but a fire department investigation failed to find evidence of the claim.
Now what
It's never good news for a company to report that its products are catching fire, but it's particularly bad news when that company is endeavoring to convince the market that it has an attractive alternative to the industry's mainstay products.
For Nikola to report a fire at the end of June and then report that the damaged vehicles reignited, investors are clearly questioning the reliability of the product -- especially bad timing considering the company's recent progress.
This doesn't spell doom for Nikola. What it does require, however, is transparency by management. If it's a manufacturing defect, it won't be great news for Nikola to announce, but it will go a long way in instilling trust in the company's ability to be forthcoming and address problems assertively -- qualities that investors surely want to see when investing in a growth stock.
